Hubert Senters here.
Let’s take a look at gaps. So I like to trade gaps. It’s slightly different than other people like to trade gaps. And if you understand this concept quicker rather than later you can potentially make more money because now you understand how to do it.
The first thing you’re going to do is you’re going to use whatever you’re going to use for trend identification. So in this case I’ve got a decent uptrend here in the Dow. It’s decent. As you can see right here. There you go. Decent little uptrend right there.
The thing is going from lower left to the upper right. That’s an uptrend. Now, since I know I’ve got an uptrend in the Dow then intraday you can trade gaps on futures, stocks, pretty much anything that gaps.
Let’s take the Dow. Now, I’m going to shrink this down. And then I’m going to say I want to trade gaps on the Dow while I have a specific chart for that. It’s a dot D chart. It gives me a $930 up and a $415 close. If I know I’m in a major uptrend which I still am at this point and then I know that this right here is going to happen fairly consistently.
It’s going to depend on what stage the market is in but if I give a gap down there’s a pretty good likelihood. It’s going to do a half a gap fill and potentially a full gap fill. Now, if I’m in a major uptrend it’s less likely to gap down and run away from me.
It will do it from time to time. The two common scenarios in uptrend is it will gap up and runaway from you gap up do some little back filling and then runaway from you or it will gap up and run away from you.
It’s less likely to gap down and runaway from you because it’s in a major uptrend. So the give me trades are the gap and goes to the upside. And then if you gap down it will probably still come back up and do a half a gap fill and a full gap fill because you’re in an uptrend.
Just keep it at the back of your head when you’re trading gaps and overall what mode the market is in.
Good luck. Hope it helps. See you on the next video.