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Gap Trading Combined With Supply & Demand ZonesWhat Are Gaps? Gaps are nothing but Price of a Stock moving up and down sharply with no or little trading happening between the previous days close and current days open. Gaps show an ultimate picture of imbalance between supply & demand. Gap formations are due to many fundamental and technical reasons. Most common example, when there is an announcement of company earnings. Gap Up or Gap Down is imminent the next trading day due to positive or negative news. A trader can profit from gaps provided he/she can identify the type of gap and its location with perspective to Institutional Supply & Demand Zones. Gap Trading Strategy using Supply and Demand Zones A lot of traders are fearful of Gaps and see it as a threat & aren’t comfortable carrying positions overnight. However, for a professional Supply Demand Trader, these Gaps aren’t threats on the contrary they provide high probability trading opportunities, when combined with Supply & Demand Zones. Four Gap Structures That We Look At: 1. Inside Gaps 2. Outside gaps 3. Novice Gaps 4. Professional Gaps 1.How to Identify & Trade Inside Gaps? Inside gaps are created when Price Opens between the prior Day’s High and low. Often these gaps fill quickly on the same day. Inside gaps can be mainly used for quick intraday trades, provided they happen at strong supply & demand zones. Gap Up into a strong Supply Zone provides a good short opportunity, whereas Gap Down into a strong Demand Zone presents a good long opportunity. Let’s see an example: 2.How to Identify & Trade Outside Gaps? Outside gaps are created when Price opens beyond the Prior days High and low. These gaps generally do not fill on the same day. They indicate the establishment of a new Trend or the continuation of the existing one. One must wait for quality Supply & Demand Zones to form after the gap and wait for a pullback to join the new move. Let’s see an example: 3.How to Identify & Trade Novice Gaps? When price gaps in the same direction of the current trend, then it is called a Novice Gap. Novice gaps as the name suggests are created by novice trader emotions and are excellent opportunities to find high probability trade setups. Gap Up or Gap Down after extended moves into quality areas of Supply & Demand, offer us high probability Short & Long opportunities respectively. Let’s see an example: 4.How to Identify & Trade Professional Gaps? When price gaps up in the Opposite direction of the current trend, it is called a Professional Gap or a Pro gap. Pro gaps represent a significant imbalance between Supply & Demand. Pro Gaps generally occur after extended moves in one direction, taking the amateur traders completely by surprise. They generally bring about trend change. Pro Gap Down & Pro Gap Up form high probability Supply & Demand Zones. Pull back to these zones provide us with opportunities to enter at trend change points. Let us see with an example:
NSE:CUBEducation
by MAKTradingSchool
16
'LEAP' the 'GAP' with the knowledge !!!Definition of a Gap:- - Gap is a space left behind by a script in its price chart. - It is the area of discontinuity price in the respective script. - The reason may be anything but generally it occurs due to sudden changes in the sentiment of the market due to some events or news related to the particular script. Types of Gaps:- 1. Common Gaps - These gaps are not so certain to be considered. They are visible casually and almost every day as we have seen Nifty gaps up or down daily without any event or news. They have a high tendency to be filled (price generally comes back to that gap). 2. Breakaway Gaps - A much more significant gap indicates the start of a new trend. Often seen at resistance or support points for example a stock is trading in a small band bounded with resistance and support and suddenly breaks the band with a gap on either side, now this gap indicates the start of the new trend which is according to the level which is broken. Higher volumes at the gap point further confirm the move. 3. Runaway Gaps - Runaway gaps are quite similar to the above one but, the major difference between them is runaway gaps are seen in the middle of the trend and breakaway gaps are seen before the trend. This gap indicates the strength of the trend and confirms the buying/selling interest in the stock. This gap generally occurs in aggressive buying/selling interest due to news or events. 4. Exhaustion Gaps - These gaps occur at the stage of exhaustion of the trend i.e. the trend is very close to finishing. If spotted correctly it could provide you exit at a very sweet spot. It is a typical sign of trend reversal. It generally occurs after the spike in the price of the stock. This indicates that the market players are not interested to take the position at such a high/low price. The volumes would be unusual in this case. My Observation: Breakaway and Exhaustion gaps can be spotted with help of RSI, if you RSI at choppy levels i.e. 40-60, and a significant gap is formed it is generally a breakaway gap. And if RSI is at extreme levels i.e. 15 or 85 and a significant gap is formed it is usually an exhaustion gap.
NSE:NIFTYEducation
by Chaser30
5
Gap up / gap down intraday strategy with simple entry / exitI get queries from a lot of people who don't want to study technical analysis much. They're just focused on getting a predefined trading strategy, which they can use effectively in the market without looking much at the charts . So, in this video, I share a strategy which has been given really good results and it works a lot of times and I believe the probability of this particular strategy is close to around 65 to 70%. It has simple entry and exit rules, and you can only apply this particular strategy when the market opens gap up or gap down. See, whenever the market opens gap up or gap down, there is high volatile period of the market during the beginning half an hour or an hour. And in that period of time,if you place a trade, then you have a good probability if market moves as per expectation. As you can see these days, nifty and back nifty have been creating gap up and gap down opening almost on a daily basis. In this case, the first rule is that if the market opens gap up by more than half a percent. So for example, if bank nifty opens gap up by more then 200 points. , then only you can apply this strategy. And on the other hand, if nifty opens gap up or gap down by more than 50 or 60 points, then only you should think of applying this particular strategy. Small gaps do not count in this strategy. So if bank nifty gaps down or gaps up by only 50- 60 points, then avoid this strategy altogether. See, whenever the market is opening gap up or gap down, there are two possibilities. The market might continue the current trend. For example, if the market opens gap up, the chances are that the market might move higher, or the other possibility is that the market might go sideways the whole day. So ,in this case, whenever you see the market opening gap up or gap down by more than half a percent, just have to follow this simple procedure. Just plot the 15 minute chart with a 20 exponential moving average. Why 20 exponential moving average because the market usually gets good support and resistance around the 20 moving average. You can expect the market to stall around the moving average for a lot of times if you take a trade. So ,you just have to plot the 15 minute chart, and if the market gaps up or gaps down, you just have to watch the first 15 minute candle. So if the market opens gap up and it forms a bullish candle. Then , what you can do is you can sell puts if price breaks the first 15M candle high. You can sell puts with the stop loss at the low of the candle. If the market comes below the low of the candlestick the first 15 minute bar, then you exit your position and book the loss. Why sell puts? The idea behind selling puts is that during the first 15-30 minutes, the volatility is on a very higher side during that period. And if at that point of time you start to sell options, then with the passage of time, as the market starts to move sideways, the volatility reduces. And, what occurs is a concept called IV Crush. The volatility starts to reduce very quickly and that will give you a benefit if you sell a put, even if the market goes sideways. So for example, the market formed a very big bullish candle, and the criteria is if it crosses the high of the candle ,sell puts . So, the whole day, if the market is moving sideways/upwards , the volatility crush will start to happen. And with the passage of time, you'll start to see the benefit of the IV Crush and the time decay. So this is a very handy strategy which you can apply. Always remember, keep the stop loss below of the first 15M candle. It's a very effective technique, and it's based upon gap openings. And ,the first 15 minutes usually tell us who is on the stronger side, who's winning , buyers or sellers. So make sure the gap is big and whatever bar is being formed in the first 15 minutes. If the bar is bullish, you sell a put If the price crosses the high of that candle stick, and stop plus below the low of that candlestick. It's an effective rule based strategy and you can back test it on nifty and bank nifty. And you can also check its reliability, its effectiveness, you can also add this particular strategy in your tool kit. So I hope this strategy will provide some sort of value to you in your trading. And if you find the video helpful, don't forget to like this and share it and also comment your thoughts. Thank you very much and take care.
NSE:BANKNIFTYEducation
by piyushrawtani
24
Breakaway GapWhat is the Breakaway gap? It occurs when the price goes above the resistance or below the support. It changes price direction from the existing chart pattern. Here, there was a price trend for 1 month where prices were trading in the ascending parallel channel. But on the 13th of June, it changed its direction. Impact of Breakaway gap? It creates a strong resistance. When it occurs on the downside, the probability of the gap getting filled is very low because market participants become fearful and a chain reaction kicks in. Whereas in an upside breakaway gap, it acts as support and there is a higher possibility of slight retracement because here participants become greedy and close their position. How to trade it? In the downside breakaway gap, consider the low of the previous candle as a point of exit and short the calls In the Upside breakaway gap, consider the high of the previous candle as a point of exit and short the puts
NSE:NIFTY1!Education
by OK_Rane
1
Basic of Gap theory(Common gap, Breakaway gap, Runaway, Exhaus )Gaps can offer evidence that something important has happened to the fundamentals or the psychology of the crowd that accompanies this market movement. Gaps can be subdivided into four basic categories: • Common gap • Breakaway gap • Runaway/ Continuation gap • Exhaustion gap -------------------------------------------------------------------------------------------------------------------------------- --> Common gap-: Common gaps generally occur uneventfully or when there is nervousness among the investor and has low volume , generally gap is filled in the future . --> Breakaway gap( Measuring gaps )-: A breakaway gap is those which have high Volume and the chances are more to cover the gap . The traders who have invested in the wrong side need to cover them. A new change in the market has taken place. The point of news breakout becomes support or resistance. --> Runaway gap-: runaway gap has increased in liquidation and those who are holding the position will get panic and sell/buy. the runaway gap is caused by the trading limit imposed by the exchanges. --> The exhaustion gap ( Island-cluster )-: exhaustion gap happens near the end of the movie. Mainly have a high volume and have a large difference from the previous price, in this state of panic long down move is transpire due to a feeling or belief that bad things will happen. exhaustion gap quickly fills a gap when price reverse. I will update shortly Real-Time use of Gap Trading Strategy shortly. Kindly comment, if you have any questions/suggestions for me. You can share your LOVE by giving LIKES .
NSE:BANKNIFTYEducation
by Trade-Technique
72