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gap trading strategy

Best Gap Trading Strategy for intraday trading

Gaps are a common feature in the equity markets. I have seen a lot of people panic if the markets open Gap Up or Gap Down. Does it happen to you? I have a simple gap trading strategy for you.

Well, if it does, I have a simple solution for you.

Let’s understand why the Market creates a gap.

When a market opens at a price higher or lower than its previous day’s closing price, the market has created a gap. It is the area on the chart where essentially no activity has taken place. Why does this happen?

  • Company results ie; Quarterly or Yearly. (Due to higher than expected results)
  • Major factors like geopolitical or national factors. ( News)

There are 4 types of Gaps.

  1. Breakaway Gaps
  2. Exhaustion Gaps
  3. Common Gaps
  4. Continuation Gaps

Here we won’t be going into the fundamentals of Gaps. If you want to learn more about the basics click me

To help you conquer the quest of gap trading. I have an indicator.

BUYGU Indicator by [towT] on trading view.

To Use this indicator you have to go to trading view and search for the indicator Buyable GapUp by TowT.

Find in trading view.

How to use the Indicator for gap trading

  • Wait for the market to open.
  • Screen for the stocks with buygu Signal.
  • Time Frame – 3 Mins

Conditions For Going Long after a Gap up

  1. Wait for the signal after the market opens. It appears on the first candle of the day. So there is no need to wait for the signal as such just screen through your watchlist to find the stocks to trade.
  2. If a stock that has a signal is present, Mark it high.
  3. Wait for the price to cross its high
  4. Volume should be high
  5. Buy when the price crosses high. {target 1% / stoploss 0.5%}

Conditions for going short after a Gap down

  • Wait for the signal after the market opens. It appears on the first candle of the day. So there is no need to wait for the signal as such just screen through your watchlist to find the stocks to trade.
  • If a stock that has a signal is present, Mark it low.
  • Wait for the price to cross its low
  • Volume should be high
  • Buy when the price crosses low. {target 1% / stop loss 0.5%}

for More strategies click here

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