Gap Plays

Quote from AAAintheBeltway:

Don't you find that this reverses very quickly and unpredictably at times?
More...

I live for days like that!!

Check this out:

Trading on May 26, 2005:

Trade #1:
09:30:34 Short PDCO 1000 shares @ $46.763
09:31:58 Cover PDCO 1000 shares @ $43.636

Trade #2:
09:32:10 LONG PDCO 1000 shares @ $43.91071
09:34:23 Sell PDCO 1000 shares @ $45.043

Trade #3:
09:37:08 LONG PDCO 1000 shares @ $45.05
09:39:09 Sell PDCO 1000 shares @ 45.319


Profit/Loss
SHORT Trade #1: +$3127.00
LONG Trade #2: +$1132.29
LONG Trade #3: +$269.00

Total Profit: $4,528.29 (Commissions/Fees not taken into account)

Granted this was a stellar day for me and it doesn't happen every single time. But this trade is a very good example of the "violent price action" that I key on and live for!

But see how the momentum changed between the Short Trade #1 and when I went LONG in Trade #2. You have to feel the pulse of the market and how things can shift. Trade #3 is kind of a silly play on my part.

Note: I think everyone could have played #1 and came out a winner. The price drop was that radical and unmistakable on that morning. Shoots, you could have foolishly waited till 9:39 am to cover your short and you'd still come out a winner!

And oh yea. Please know that not all my trades are 100% winners. None can say that. But the key is to control your losers/losses. If you don't you might as well call it quits right now.

Playing Gaps is not a gentlemanly thing; you must show no mercy when you trade and you must above all be willing to admit your mistakes by getting out of a play that moves against you.


<-gapster->
 
Quote from chud:

Were you only watching those gap downs this morning? Why not the gap ups?
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I key on Gap Downs because I believe fear is a stronger emotion than Greed (Gap Ups). In our society there is a built-in bias against Greed (think religions) but not so with Fear (again, think religions aka fear based organizations.)

Also, think of all the Stop Loss orders pouring thru all the brokers out there when a particular stock Gaps Down. Again Stop Losses are based on Fear and most people use them. Lots of people carry positions overnight for the "long term". So think of all the automated orders to SELL when a stock gaps down.

If you think about it, a good case can be made for Gap Down stocks that DO NOT FALL IN PRICE after the Open. This means that there is strong demand for the stock in that that demand is absorbing all the stop loss orders pouring in! This may indicate that this stock is poised to shoot upwards once all the stop loss orders are fulfilled and the selling demand lessens...

For Gap Down stocks short term (for me this is a minute or two!) my bias is to SHORT. My mid-term bias (say after the first few minutes) is LONG. My long-term bias is "EXIT Now Fool!"


<-gapster->
 
Quote from chud:

No trades today Gapster?
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Last nite i went out for my 18th anniversary. took the wife to a japanese restaurant Shokudon here in honolulu.

More to life than trading folks!

...long story short, didn't wake up at 3:15am to scan markets.

It's 7:30am right now (1:30pm EST) and I just ran my pre-market $50/mo esignal scan. Just ONE equity comes up:

SHLD - Sears Holding, Down $7.76 in Pre-Market.

Any stock that is down almost eight points in pre-market is set to rocket in a dominant direction off the open. THIS IS A GIVEN in this "un-giveable" Market. It is your job and destiny to ride this direction. What more "signals" do you need? Throw out "fundamentals" (aka "funny mentals") and Technical Analysis (aka "T & A" --hah!)

SHLD was a screamer after a minute into the open! Recall that my initial bias (the first two minutes or so) is to SHORT. SHLD is shortable on Alliance (Elitetrader Sponsor) via ARCA, no up-tick rule.

SHLD opened at $147.21 and the highest it ever got in the first minute was plus two cents! A lousy two cents off the open on a stock that is around $150... what does that tell you? Hmmmm...maybe that no one wants to buy, you think??

SHLD screamed down to $144.50 at the end of three minutes into the Open. That's over THREE POINTS in THREE MINUTES. I would have waited and watched the first minute, then made my play.

It's so easy in hindsight, huh?


<-gapster->
 
I was watching SHLD but it wasn't available from my broker.

What's with Alliance? I was reading their website, and the disclaimer states that they are not intended for U.S. or Canadian residents.
 
Gapster from one gap trader to another it's nice to hear other are making $ playing the gaps.

I was a Waxie student back in 2001. I took his gap plays and slightly modified them to fit my own trading style.

For instance I have a set plan for the opening market. I usually will only trade Nasdaq gap stocks. My plan is in 3 parts. Part one I call a pre market scalp play. Its a play like a Waxie gap but at 8:00AM. I use the S&P futures and DOW and NASDAQ Futures for direction. I take small positions. Pre-market is tricky when trying to play volume. Part 2 I call a Open Bell Scalp Play. This just like your gap play but, I use limit orders with Island or ARCA. Scalping usually .10 to .50 per trade. Part 3 is is the traditional Trend Fund Gap Play using the 5 minute bar and making entry by .01 from the hi/low of the stock. This is a good play and I've made money from it. However, I'm finding it even harder to find these traditional gaps. Enter at the high/low of the first 5 minute bar and take your profits when the gap closes.

Anyway I'm with Alliance also. been there for over 1 year now and love them. If you need to call them they can usually resolve any issue. Karen is good person who goes out of her way to help you.

Keep posting your plays your on to something.
 
Quote from chud:

What's with Alliance? I was reading their website, and the disclaimer states that they are not intended for U.S. or Canadian residents.
More...

Alliance told me that around 75% are American traders. Here is the US, you can't short stocks unless it ticks up, OR UNLESS YOU HAVE A BROKER'S LICENSE.

Alliance is based in Jamaica. Besides the no "uptick" rule on shorting stocks (only via ARCA however), you can daytrade with $500 (so with daytrade buying power that is $2000 daily buying power) unlike in the US where you need $25K to daytrade or if you fall into the daytrading pattern.

Be aware that Alliance's ECNs go down with irritating regularity but you can trade with the other ECNs like INET (instinet/island) they have available.

Also their tech people converse in excellent english.

Big point against Alliance is lack of SIPC insurance. Regardless of how it sounds like on their home page, they do accept american traders. You can take their DASTRADER trading platform out for a demo spin for free.

And Alliance is an Elitetrader Sponsor!


<-gapster->
 
Pre-Market Gap Stock Watchlist for June 8, 2005 WEDNESDAY:

Gap Downs:

MATK
SWFT





Shortable via Alliance. Open up Time and Sales and observe Price movement @ Market Open.


<-gapster->
 
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