Even Cattle futures were already declining prior to the Mad Cow lock limit selloff in Dec 03. The vast majority of the time , and I mean vast, gaps occur in the direction of your trade if you have been watching daily and weeklies. It is the short term trader who just trades what he sees day to day, that wil be nailed.
Oscillators are invaluable in divergence trading which is what I do. I then follow the ensuing trend and look for new divergence.
Well, I can't say I agree there either. Divergeance between price and an oscilator is nothing more than the result of a change in volatility in price over the presribed time as indicated in the periods included in the oscilators calculations. There is an illusion at first sight that it seems relevalnt, but when you sit down and look how often a divergeance between price and the oscilator actualy results in a change of direction of the market , the results are not at all conclusive ... about 50% of the time. Why look at oscilators when you can just lok at price ? Oscilators just follow price... and with lag no less. Following an oscilator for indication of price movement is like trying to follow your shadow to find your way home.
Don't forget you sometimes would make short timeframe trades to override long term trades. Why would you provide us the newbies so many simply conflicting comments?
Attached is the weekly Yen Futures chart from 1985. I have pointed out the gap. Definitely in the direction of the dominant trend. You'll notice that the gap later in the chart was then filled and continued in the direction of the trend. The key here is that while watching the dominant trend, one can fine the direction to trade in. Once you had ridden this one up, you would have been comfortable with this trade as even the gap did not pierce the reaction lows. In addition the second gap gapped into noise. Gap reversals seldom occur without technicals indicate that they are coming and gaps that occur with the technicals will predominantly be continuation gaps or reversal gaps.
I seldom trade around a position when the 20 MA is strongly one way. When flat, I will sometimes or when it is flattening. For the most part, I am in a trade on the daily, weekly and monthly charts and I hold or add to it.
Well, I see 2 gaps in that chart.. one in the direction of the trend, and the other in the opposite direction of the trend .. you call that conclusive ?