Finance and Forex Trading Forum

Anonymous · Guest

Trading Gaps with Eat My Shorts

I opened my forex charts the moment the market opened today. Many of the currency pairs had gapped up and down. What are gaps? How to trade gaps profitably, and stay within low risk high reward objectives we are looking for as traders?

Holy Grail Trading

Every trader is looking for the holy grail - so to speak - of trading stocks, options futures, and forex. Trading gaps is just one of many profitable or un-profitable trades setups going. Learning what to recognized in a gap and apply time tested gap trading techniques does keep your risk low and reward high. Always know the rules, and follow them.

There is always a debate of what is the best method of determining the next big price move in a stock, options, future, or forex contract. Is it the fundamentals or the technicals? Or put it another way - what the price IS or what it is DOING?

Fundamentals

Many investors look for undervalued stocks, ones that show potential, they try to determine the stocks future in light of the world scene and coming needs. They look both to the past, present, and future.

Technicals

Some don't care about the stock itself but look merely to indicators, is the price relatively oversold or undersold. These types may look for such things as moving averages and divergences between short term and medium term movements of the price. They hope to find mathmatical formulas that will tell them everything they need to know and if and when to buy or sell.

Combining Techniques

Because both worlds are so vast, it is often very difficult to combine the two. Imaging try to blend karate and wrestling 100 years ago. There are hybrids now, but masters of both arts are jealous and do not like to share. Also, where do you start?

Strengths Weaknesses

First you need to know the strengths and weaknesses of both. Fundamentals can tell you that price is stable and currently worth the price. Technicals can tell you how the market feels about the financial instrument right now. But what is the best way to foretell the future price?

How much time you spend depends on what your objective is. Are you investing in this for life, or is this a one-month trade or a weekly, or day-trade?

Eat My Shorts Gap Trading System

Here's one way to trade of many. First look to issues that gap-up or gap-down. I like issues that move and I hate investing in a issue that just holds my money for years. Screen all gap-ups after the market closes. Next look a little closer at the fundamentals. Examine the stock to see WHY it gapped up. Was it a news item, a good report, a last bit of euphoria amonst the bulls? If the fundamentals do not tell you why the stock gapped up then look to the technicals.

Basically, of the many reasons that a issue will gap, but only accept two. You want a issue that gapped to fill itself or to go back down to previous 'pre-gapping' levels. A good knowledge of fundamentals and technicals can tell you this. What happens next is a no-brainer. Watch during the first 1/2 hour of stock market activity the next morning to see what's happending. If the above is true, you can quickly short the issue short term and take a quick profit. Of course use stop-losses in case the market proves you wrong.

Your mentality is not to invest for the next 30 years and wait for a company to double in size. You only want 2% - 4% profit per day, which is reasonable and fairly easy to get if you know what to look for.

What does 2% to 4% per day relate to in profit?

If you started with $1,000 and consistently got 4% profit per day for example, and kept re-investing the profits every day, how much do you think you would have after 100 days? $50,0000!!!

How much would your $1,000 turn into at the end of one year?

83 billion dollars!!!

Yes, smaller profits that compound are worth much more to you than a issue merely doubling in one year. But again, we are not perfect and we must be happy with merely being millionaires and not billionaires - YET!

Click here to review a detailed Gap Trading System called "Eat My Shorts"! What a crazy name for a trading system?