Fade Gap

DISCLAIMER
The author and publisher of this book and the

accompanying materials has used his best efforts in
preparing this information and system. The author and
publisher make no representation or warranties with
respect to the accuracy, applicability, fitness, or
completeness of the contents of this information or
system. He disclaims any warranties (expressed or
implied), merchantability, or fitness for any particular
purpose and any personal liability, loss, or risk incurred as
a result of the use of any information or advice contained
herein, either directly or indirectly. The author and
publisher shall in no event be held liable for any loss or
other damages, including but not limited to special,
incidental, consequential, or other damages. As always,
the advice of a competent legal, tax, accounting or other
professional should be sought. The author and publisher
do not warrant the performance, effectiveness or
applicability of any sites listed in this book. All links are for
information purposes only and are not warranted for
content, accuracy or any other implied or explicit purpose.

MATERIALS IN OUR PRODUCT AND OUR WEBSITE MAY
CONTAIN INFORMATION THAT INCLUDES OR IS BASED
UPON FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF THE SECURITIES LITIGATION REFORM ACT
OF 1995 (USA). FORWARD-LOOKING STATEMENTS GIVE
OUR EXPECTATIONS OR FORECASTS OF FUTURE EVENTS.
YOU CAN IDENTIFY THESE STATEMENTS BY THE FACT
THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL
OR CURRENT FACTS. THEY USE WORDS SUCH AS
"ANTICIPATE," "ESTIMATE," "EXPECT," "PROJECT,"
"INTEND," "PLAN," "BELIEVE," AND OTHER WORDS AND
TERMS OF SIMILAR MEANING IN CONNECTION WITH A
DESCRIPTION OF POTENTIAL EARNINGS OR FINANCIAL
PERFORMANCE.

ANY AND ALL FORWARD LOOKING STATEMENTS HERE OR
ON ANY OF OUR SALES MATERIAL ARE INTENDED TO
EXPRESS OUR OPINION OF EARNINGS POTENTIAL. MANY

FACTORS WILL BE IMPORTANT IN DETERMINING YOUR
ACTUAL RESULTS.

FURTHERMORE, THE PUBLISHER AND THE AUTHOR DO
NOT GUARANTEE THAT THE HOLDER OF THIS
INFORMATION WILL MAKE PROFIT FROM THE
INFORMATION CONTAINED HEREIN. ANY REFERENCES TO
INCOME POTENTIAL, INCOME EARNED OR INCOME
TESTIMONIALS ARE NOT A GUARANTEE OF YOUR
INCOME, NOR ARE THEY REPRESENTATIVE. IN FACT NO
GUARANTEES ARE MADE THAT YOU WILL ACHIEVE ANY
RESULTS FROM OUR IDEAS AND TECHNIQUES IN OUR
MATERIAL AT ALL. THERE IS NO GUARANTEE YOU WILL
DUPLICATE THE RESULTS STATED HERE. BY INVESTING
IN STOCKS BASED ON THESE TRADING METHODS, YOU
DO SO AT YOUR OWN RISK.

Any testimonials represent the results of exceptional
talent, hard work and ability. Your success will depend on
your own hard work, talent and ability. As with any
business, it is up to the individual owner of said business
to ensure the success of the business. Involvement in any
business including this one carries with it the inherent risk
of loss of capital.

It is strongly recommended that the purchaser contact
any and all federal, state, and local agencies which may
regulate, tax, or otherwise control the commencement of
a business such as the one presented here. The publisher
and author do not intend to render legal, accounting, or
other professional advice in the documents contained
herein.

Avery Horton The Rumpled One
http://www.daytradeformoney.com

Mark Crisp The Stress Free Momentum Trader
http://www.stressfreetrading.com

Copyright Notice

No part of this ebook may be reproduced, stored in a
retrieval system or transmitted by any means, electronic,
mechanical, photocopying, recording, or otherwise,
without the written permission from the author.

Copyright 2006 http://www.daytradeformoney.com
Fading The Gap - Day Trading Profits

Method by:
Avery Horton The Rumpled One
http://www.daytradeformoney.com

Presented by:
Mark Crisp The Stress Free Momentum Trader
http://www.stressfreetrading.com

Past experience suggest that there is an 85 percent chance
that the gap will be filled that day.

By studying the pre-market volume, you can get a better idea
whether the morning gap is running on a full tank of gas, or is
fast approaching empty.

Gaps are like windows and, like all windows, at some
point they are going to close. The key is to be able to
predict accurately if the days gap (window) is going to be
filled (closed).
Not all gaps are the same, of course. Some appear at
momentous market reversal points and take days or even
weeks to get filled. Much more common are those gaps
that are news reactions or fishing expeditions. They are
smaller in nature and can be faded regularly.

Gaps are like windows and like all windows at some point
they are going to close. The key is to be able to predict
accurately if the days gap (window) is going to be filled
(closed).


Whatever the exact reason, gaps are the result of some kind
of event happening while the market is closed. The result is the
buying or selling pressure at the open of the next day, which
will make the stock open at a different price than where it
closed.

Here are some concepts and general rules about gaps. First,
we generally never buy a large gap up at the open or sell short
a large gap down at the open. When market makers have the
chance, they will often exaggerate the gap. Also, large gaps
are already extended, making the play risky. We tend to "fade"
the gap initially, if played
at all. Fading means to play the stock to come back in to where
it was. Fading a large gap up would be to go short the stock as
it trades down after a large gap up.

The Method:

The Key to this method is to take sure small profits and not to
get greedy. A $0.20 profit on 1,000 shares is $200.

Make that every day in 30 minutes and you will be happy!

It goes like this...

When gaps are filled within the same trading day on
which they occur, this is referred to as fading. For
example, let's say a company announces great earnings
for this quarter, and it gaps up at open (meaning it
opened significantly higher than its previous close). Now
let's say that, as the day progresses, people realize that
the cash flow statement shows some weaknesses, so they
start selling. Eventually the price hits yesterday's close,
and the gap is filled. Many day traders use this strategy
during earnings season or at other times when irrational
exuberance is at a high.

1) I select the stocks to trade each based on
statistics... gap fill 85% of the time or
better and/or high - open > $.50 over 85% of
the time.

2) Remember, I said the stock must move at
least $.10 TOWARDS THE PREVIOUS CLOSE BEFORE I
ENTER THE TRADE.

3) If you want a stop it would be open - .10
for long entry and open +.10 for short entry
(which is entry for going the other way!)
4) Exit? That depends on how greedy you are...
1000 shares times .$12 nets $100 after
commission. If it stalls it falls, ride it
until you see any sign of weakness then take
your money off the table.

5) As is read this, it is exactly 30 minutes
after the open:

Typical Trading Day:

Click link for large image:
http://www.daytradeformoney.com/screenshot.jpg
- you need to be connected to the internet.


NO trade on SHLD.

GOOG filled the gap.

AAPL, SNDK made at least .12

HANS, ISRG dipped and reversed. Look at the
low time... not much action to the downside.
And if you look at the middle, they were above
the previous day's middle.

1) Trade - go long if the stock gapped down, go short if the
stock gapped up.

2) at/near the open, that would be 9:30 AM Eastern time.

3) at/near the open price, that would be the price of the FIRST
trade of the day for the stock. To go long, the price should be
between the open + .10 and open + .20. To go short, the
price should be between the open - .10 and open - .20. You
want to make sure the stock is moving one way or the other.

You want to trade stocks that have and average daily volume
of at least 1,000,000 shares and that have a day range over
$1.00

4) Take profit as soon as possible.

You should be finished trading in 30 minutes or less.

Explanation:

1) Trade - go long if the stock gapped down, go short if
the stock gapped up.

No big brainer here. We are fading the gap so if a stock
gaps UP we want to trade down short and if a stock gaps

down we want to trade up long. Fade the gap..not go with
the gap.

2) At/near the open, that would be 9:30 AM Eastern
time.

We are looking to get in as soon as the market opens. We are
trading the opening range so to speak. Not waiting for the dust
to settle. With this method we are actually looking to be
finished by the time the stock settles into its routine. You will
find most of a stocks volatility happens in the opening 30
minutes.

3) At/near the open price, that would be the price of
the FIRST trade of the day for the stock.

To go long, the price should be between the open + .10 and
open + .20. To go short, the price should be between the
open - .10 and open - .20. You want to make sure the stock is
moving one way or the other.

Very basically what you are waiting for here is some small
confirmation before entry. So if a stock gaps up you want to
see it come down at least $0.10 before shorting.

Examples

1) AAPL gaps up to $65.50

At the open you place a short sell at $65.40.

If you are NOT filled in the first 20 minutes of trading scratch
the trade.

If filled your profit target is $0.12 to $0.25 or: $65.28 to
$65.15 (adding in the -$0.10 safety factor)

2) The opposite for a stock that gaps down:

GOOG gaps down to $250

Anywhere from 9:30 to 9:50 place a buy order in at: $250.10

Initial stop at: $249.90 (-$0.20)

Target is: $250.22 to $250.35

Whilst these profits seem really small. You have to bear in
mind we are trading in less than 30 minutes a day the opening
price range. This IS NOT trend following where you have to
press your big winners. This is all about taking small sure
profits from the stocks. You need to ideally be trading 500+
stocks per trade. That would be $110 - $125 profit (before
commissions) per trade. Wait until you get up to a 1,000+
stocks per trade.

From Avery:

1,000,000 shares over at least 10 days. I
usually use 30 days minimum.

Price range is not relevant. I look for the
daily range to be over $1.00. Usually the
stocks are in the over $20 range. The idea is
to take dimes and quarters per share and print
$100 bills. 1000 shares is what I usually
trade. At the open, there is volume and
volatility - that's what makes this work!

You want to trade stocks that have an average
daily volume of at least 1,000,000 shares and have
a day range over $1.00

How many stocks at a time? That is up to the
trader. Start trading one stock, then as you
get comfortable, add another and another.
That's why I wrote AutoAvery. The computer can
handle more than I can.

It's not tricky at all.

Keep to liquid stocks that have a good daily range of over $1.
No point in trading stocks that do not move. Do not concern
your-self with price range. As you will find this filter
automatically keeps you the higher priced stocks. Whats
important is the daily range and volume.

A great scanner you can use to find these stocks is at:

http://screen.finance.yahoo.com/newscreener.html

Use the Launch Yahoo Finance Stock Screener

And the scan is:

Exchange = NASDAQ
Volume => 1M
BETA: => 2


Click link for large image:
http://www.daytradeformoney.com/screener.jpg

From this you have your list of stocks that you will look at
daily for the Fading the Gap Trading Method.

To Manage Your Daily Gap Trades Use:

Traders can use www.quotetracker.com for free.

Just load the program and tell it what real
time data feed to use.

Then format the portfolio display to have
Change from OPEN, Previous Close, Open, GAP and
Value Ch% on it:


Click links for large images:
http://www.daytradeformoney.com/QT1.jpg

http://www.daytradeformoney.com/QT2.jpg

You can use ANY real time data feed to "manage"
your trade:

http://www.level2quotes.com - if you sort on
%change, then you basically KNOW THE GAP

http://www.tradingday.com/3books.html - can
watch 3 level IIs here FOR FREE.

Remember:

Fading the gap is going for sure thing $0.20 to $0.50 profits
in the first 30 minutes of trading. DO NOT GET greedy. Easy
come. Easy go in this trading method. You are here to milk
the trade for all it is worth. Its all about quick. Sure,
consistent daily profits.

The Rumpled Ones Daily Crossover Method
Only 1,000 Copies Will Be Sold

Whilst Avery just loves trading those opening gaps his most
profitable daily method is what he calls the Daily Crossover
Method. It is a day trading method for getting $0.5 to $1.0+
profits but it can be adjusted to swing trade for 1-5 day trades
going for $3+ moves.

Check it out at:

http://www.daytradeformoney.com/averysupermethod.html

Fade Gap

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fade Gap

Uploaded by

Copyright:

Available Formats

DISCLAIMER

The author and publisher of this book and the

You might also like