Posted by frtaylor on 17th of May 2012 at 08:54 am
Matt,
How do you deal w/ a gap of recognition, from a trading
standpoint, on the day that it is potentially underway? I want to
be smart about a possible gap, as mentioned in the newsletter.
Given that you don't know beforehand whether the gap will
fill during the session, I see a few options:
Sell immediately at the open and wait to see if gap fills. If
it fills, decide whether to re-enter based on the fill itself or
wait for a trigger of some kind (what?).
Wait until EOD and sell then if gap remains. The question
of re-entering isn't an issue in that case, but in the meanwhile
price may have fallen considerably.
Wait for a bounce and sell in accordance w/ the SPY system sell
signal. I worry about this last option: isn't the point of a
gap of recognition that the market will not come back up and fill
the gap before heading significantly lower? And wouldn't the
SPY system in that case give a sell signal at a loss, i.e.,
somewhere well below the gap?
Posted by frtaylor on 17th of May 2012 at 10:10 am
I think Matt would not
mind me posting his reply, so here it is.
I'd say the gap should
occur on an open generally however I would generally employ at
least a 15 - 20 min gap rule to see how the gap behaves, because if
gaps are going to be filled, the action over the first 15 - 20 min
is generally telling. Now the SPY system will sell an
oversold bounce, just like the RSI 2 revision to the mean systems,
so I'll leave that up to you, but generally even in bad trades
those systems get out at better prices than what the bad trades are
because of the bounce, however they are unable to get out without a
bounce, and this can be a problem because if the market went into a
free fall they will not exit.
I'll let Steve fill in more since honestly, he's the one who came
up with the term 'Gap of Recognition', therefore he might have more
thoughts on this
thanks
Matt
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
Matt, How do you deal w/
Posted by frtaylor on 17th of May 2012 at 08:54 am
Matt,
How do you deal w/ a gap of recognition, from a trading standpoint, on the day that it is potentially underway? I want to be smart about a possible gap, as mentioned in the newsletter. Given that you don't know beforehand whether the gap will fill during the session, I see a few options:
I think Matt would not mind
Posted by frtaylor on 17th of May 2012 at 10:10 am
I think Matt would not mind me posting his reply, so here it is.
I'd say the gap should occur on an open generally however I would generally employ at least a 15 - 20 min gap rule to see how the gap behaves, because if gaps are going to be filled, the action over the first 15 - 20 min is generally telling. Now the SPY system will sell an oversold bounce, just like the RSI 2 revision to the mean systems, so I'll leave that up to you, but generally even in bad trades those systems get out at better prices than what the bad trades are because of the bounce, however they are unable to get out without a bounce, and this can be a problem because if the market went into a free fall they will not exit.
I'll let Steve fill in more since honestly, he's the one who came up with the term 'Gap of Recognition', therefore he might have more thoughts on this
thanks
Matt