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nesvarbu

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27/07/18

01:15

Post #: 34585432
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Originally posted by Owenb79 ↑

Gaps in the index market or pretty powerful. There is a book written in the 80's called trading for a living. Talks about what creates a gap. Index markets are made up of a bunch of stocks and they open at different prices at the open causing an inefficiency. Often you will hear in the morning on SKY news business SPI futures are pointing to a positive open up 15 points from the close of the XJO then maybe 10-15mins later after the open the S&P200 is trading flat. What that means is the price has come down and filled yesterdays closing gap. It does not happen all the time but is a magnet and will often attract. There is only a couple things I focus on and will the closing gap be a magnet I look for 10 points min above below. If the cash open at 10am spikes away and is above the prev day high below the prev low then the probability the spike will fade is high.

If the price does not come back the prev days closing price then that leaves an unfilled closing gap that may close in the next few days or weeks and will be a magnet. You cant see these gaps on a chart like the XJO because the prev day open price is the close from the prev day so there are no gaps. You can get a clue that the XJO gaped up or down because the 4 banks and miners will most likely all have gaps. Its only institutional traders that can move the market and they are the ones that know this and plot all the correct levels for trading.

A much better gap is an extreme gap where where cash opens above the or below the prev day hi or low. These generally fill in a couple of days. Have not had many since its range trading. Mostly opening at the prev day high or low.

There are other gaps, Dividends, and expiry like the example today where the market did not trade for 10mins and when it re-opened traded all the way back to where the CFD's started ticking.

There is also fading the closing gap or extreme gap fill. If the price spikes towards the closing gap in the first 10mins depending on market structure you can also fade that move. There are a bunch of strategies out there for it and you can make a living but need to use stops which is the prev-days high or low. Sometimes it might suit what I think the market might do. I only trade an hour day anyway 2 hrs is massive for me otherwise leave alarms for extreme buy and sells.

But I would stay away from intraday liquidity gaps in a contract. That is just bizarre and as a professional trader never seen anything like it in my life or from colleagues.

Hope that helps.

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Awesome post! Thank you for sharing your knowledge and wisdom...

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