Question Regarding PM Gappers

R

RKJSF

What's up everyone, hope you guys are having a green week!

I'm a fairly new trader (have been learning / paper trading since the new year) and I have read a few books which gave me the basic knowledge of being able to practice a trading strategy. This includes managing risk / stop loss, importance of when to enter a trade, support and resistance, a few technical indicators (RSI, EMA, SMA, MACD), etc.

The overall idea regarding my strategy is surrounding PM gappers with high volume. From there, I pick 3-6 main stocks to construct my WL depending on their news, PM activity and volume, etc.

This leads into my main question regarding these PM gappers, what's everyone's consensus or idea regarding a stock that say gapped up / down 10%? If it gapped up (due to good news), do we assume that it's going to continue to trend upwards? A few things it can depend on is if its near an old resistance or if its super overextended. Same thing goes for a stock that's down 10% (due to bad news), do we assume it's going to continue to downtrend or do we wait until it hits a support and try and buy into the weakness. Another thing I have issues is determining when a stock is having a pullback or an actual reversal.

Thanks for the advice and tips!
 
qlai said:
And straight to the gaps! :) I think you need to specify the timeframe you are talking about.
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I’m talking intraday. I use 1m and 5m charts mainly. I only use 15M, 30M, 4H, and 1D when drawing support and resistance.
 
qlai said:
FWIW, I think gaps are chaotic and hard to trade. But TradeNet guys seems to be doing ok with it.
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Ahh, is it due to the high volatility as well as manipulation? Are you an intraday trader? And if so, what are your choices for trading?

I find gappers are great for people who trade the open. I rarely hold trades for longer than 30 minutes.
 
RKJSF said:
Ahh, is it due to the high volatility as well as manipulation?
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I don't think of it as manipulation but rather there is lots of things happening at the same time ... large volumes/orders being transacted, talking heads/analysts making comments, MMs widening spreads, HFTs join the party. I'm not saying you cannot trade it, but I don't think you can expect TA to work as reliably. Others may disagree. Yes, intraday ... liquid stocks that I'm familiar with.
 
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qlai said:
I don't think of it as manipulation but rather there is lots of things happening at the same time ... large volumes/orders being transacted, talking heads/analysts making comments, MMs widening spreads, HFTs join the party. I'm not saying you cannot trade it, but I don't think you can expect TA to work as reliably. Others may disagree. Yes, intraday ... liquid stocks that I'm familiar with.
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Understandable. I agree that TA's can be a bit iffy. If I did use a TA, I would say VWAP / MACD are the best as it shows the dominance of either buying or selling followed with volume. I try and focus mainly on price analysis followed by support / resistance and a few patterns. As mentioned, I'm still new so I'm trying to master a single strategy and 1-2 patterns and see if it works. If it doesn't, switch it up a bit or work on my mental thinking.

I watch some people who trade ETF's all day, which is fine as long as it works for them. Do you just trade the same liquid stocks by playing the reversals to support / resistance everyday? Or do you have some new stocks every day, etc. For example, the last few days except today, I've been trading $AMD and $NVDA, but some days like today, I'll have the stock $MGNX on my WL as well.
 
In my experience, the direction it gapped overnight doesn't tell you whether it will go up or down at the open. But the chat room I am part of uses gappers as a way to find the stocks that will be alive that day.
 
Manually, I "scalp" mostly tech stocks around the open and sometimes around the close. I avoid stocks I'm not familiar with and stocks with large spreads as I mostly take liquidity.
 
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