SPX What is a gap? A gap is created by a difference between the
opening and close price of a stock, index, etc. I'm trading the
S&P 500 "cash market" (regular business hours 9:30am-4pm, so
that is what I mean by the "cash" market).
This morning is a perfect example of a gap, as yesterday the
market closed at 3,895.75. If the current price action continues,
there will be a new gap that is open there and price would have to
rally upward to fill it. There was a gap from the previous day as
well and it is at 3,995.32 that is still open as well.
This same behavior can also occur in the other direction. There
are open gaps below from the recent rally at 3,748.57 and 3,583.07.
Sometimes people are looking at a different chart/timeframe and
they miss the actual gap fill number. I've been tracking these for
many years and just simply write the number down when it occurs. So
I already know what I'm looking for without even looking at a
chart.
I can then match it up with other areas of supply/demand and
ultimately see at what points the market responds to
buying/selling. Certainly not a perfect world, though gaps have
saved/made me a lot of money over the years. The challenge is
always timing of the gap fills, some close quickly, and others take
weeks/months to fill. There is some data that 92% of them do fill
though, so dealing with probabilities as a trader/investor as I
consider making my trading/investment decisions, I must respect
that degree of risk on either side.
Yesterday wasn't ultra surprising given that the market gapped
up on a Fed event, why not gap down to reacting to another. It all
sounds good anyway for a reason "why" haha
This is part of the difficulty of trading/investing, the timing,
especially if trading it becomes a little tougher to get it exactly
right, so what I do sometimes is just take good profits, or trim
and trail my position as I don't know if the full gap fill will
occur on a particular day. Eat meat and not crumbs. Anyone telling
you that they are timing it perfectly in every case isn't being
truthful imo.
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SPX What is a gap?
Posted by fundamentalvalues on 16th of Dec 2022 at 06:43 am
SPX What is a gap? A gap is created by a difference between the opening and close price of a stock, index, etc. I'm trading the S&P 500 "cash market" (regular business hours 9:30am-4pm, so that is what I mean by the "cash" market).
This morning is a perfect example of a gap, as yesterday the market closed at 3,895.75. If the current price action continues, there will be a new gap that is open there and price would have to rally upward to fill it. There was a gap from the previous day as well and it is at 3,995.32 that is still open as well.
This same behavior can also occur in the other direction. There are open gaps below from the recent rally at 3,748.57 and 3,583.07. Sometimes people are looking at a different chart/timeframe and they miss the actual gap fill number. I've been tracking these for many years and just simply write the number down when it occurs. So I already know what I'm looking for without even looking at a chart.
I can then match it up with other areas of supply/demand and ultimately see at what points the market responds to buying/selling. Certainly not a perfect world, though gaps have saved/made me a lot of money over the years. The challenge is always timing of the gap fills, some close quickly, and others take weeks/months to fill. There is some data that 92% of them do fill though, so dealing with probabilities as a trader/investor as I consider making my trading/investment decisions, I must respect that degree of risk on either side.
Yesterday wasn't ultra surprising given that the market gapped up on a Fed event, why not gap down to reacting to another. It all sounds good anyway for a reason "why" haha
This is part of the difficulty of trading/investing, the timing, especially if trading it becomes a little tougher to get it exactly right, so what I do sometimes is just take good profits, or trim and trail my position as I don't know if the full gap fill will occur on a particular day. Eat meat and not crumbs. Anyone telling you that they are timing it perfectly in every case isn't being truthful imo.