NASDAQ: Buying The Gap Down
Today stocks opened lower this morning on news that China's GDP grew 11.1% in the first Quarter.
If you've been reading my blog for the past few months, it should be no mystery as to what I did this morning as far as trading is concerned. On the open I bought the Q's and exited the trade when the NASDAQ went positive. I've written about this trade many times and today was just another example of how profitable this pattern has been for me.
Posts
![[Most Recent Charts from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif)
![[Most Recent Charts from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_4.gif)
![[Most Recent Exchange Rate from www.kitco.com]](http://www.weblinks247.com/exrate/24hr-euro-small.gif)
4 comments:
Kevin,
You mentioned that you have written about this type of trade many times. Can you provide me with some links from your blog, or under what 'tag' shall I be looking for, if I want to catch-up my readings.
Thanks in advance.
http://kevinsmarketblog.blogspot.com/2007/03/nasdaq-buying-gap-down.html
Kevin,
Thank you for your post, there are several people who has this strategy, so call 'Fading the Opening Bell'.
You are good to provide us some statistics based on your experience.
Do you have any tool / indicator to help you to determine whether the reversal will come ?
1) For example, look at 28 Mar 2007, it is a day with gap down, retrace only a bit and continue the slide down over the whole morning big way.
2) How much is the gap do you consider gapping ? Say for the case of RUT (ER2 for future), is 1 point sufficient ?
3) Do you set a stop loss level when you open a position ?
Chiu
Hi Chiu,
What I would suggest is that you copy a 5 minute chart on all the days that the NASDAQ gaps down on the open and study them. You will develop a feel for when to hold and when to get out..
Here are a few guidelines:
In order for me to consider doing the fade the gap trade, I like to see a gap at least BELOW the previous day's low or Above the previous day's high.
I usually enter around 5 minutes after the open.
If the trade isn't working by 10:00, I will exit.
If the trade is working, I try to hold until the market goes unchanged.
My initial stop is a percentage of the 5 day average true range.
Hope this helps.
Post a Comment