Strategies of intraday trading



I know about intraday trading in spot market but can we do intraday trading in futures on stocks? I m also interested in intraday trading… Planning to start it soon. Similarly, you can sell when stock movement is strategiea below the Opening Range low. Housing-market insights from our realty pros. The biggest advantage of intraday trading is that positions are not affected by the possibility of negative overnight news that has the potential to materially impact the price of a security.




Gap trading is a simple and disciplined approach to buying and shorting stocks. Essentially one finds stocks that have a price gap from the previous close and watches the first hour of trading to identify the trading range. Rising above that range signals a buy, and falling below it signals a short. A gap is a change in price levels between the close and open of two consecutive days.

Although most technical analysis manuals define the four types of gap patterns as Common, Breakaway, Continuation and Exhaustion, those labels are applied after the chart pattern is established. That is, the difference between any one type of gap from another is only distinguishable after the stock continues up or down in some fashion. Although those classifications are useful for a longer-term understanding of how a particular stock or sector reacts, they offer little guidance for trading.

A Full Gap Up occurs when the opening price is greater than yesterday's high price. A Full Gap Down occurs when the opening price is less than yesterday's low. A Partial Gap Up occurs when today's opening price is higher than yesterday's close, but not higher than yesterday's high. A Partial Gap Down occurs when the opening price is below yesterday's close, but not below yesterday's low. The red arrow on the chart for Offshore Logistics OLGbelow, shows where the stock opened below the previous close, but not below the previous low.

In order to successfully trade gapping stocks, one should use a disciplined set of entry and exit rules to signal trades and minimize risk. Additionally, gap trading strategies can be applied to weekly, end-of-day, or intraday gaps. It is important for longer-term investors to understand the mechanics of gaps, as strategies of intraday trading 'short' signals can be used as the exit signal to sell holdings. Each of the four gap types has a long and short trading signal, defining the eight gap trading strategies.

The basic tenet of gap trading is to allow one hour after the market opens for the stock price to establish its range. A Modified Trading Method, to be discussed later, can be used with any of the eight primary strategies to trigger trades before the first hour, although it involves more risk. A trailing stop is simply an exit threshold that follows the rising price or falling price in the case of short positions.

The stop keeps rising as long as the stock price rises. In this manner, you follow the rise in stock price with either a real or mental stop that is executed when the price trend finally reverses. If the dsm stock options gaps up, but there is insufficient buying pressure to sustain the rise, the stock price will level or drop below the opening gap price. Traders can set similar entry signals for short positions as follows:.

Poor earnings, bad news, organizational changes and market influences can cause a stock's price to drop uncharacteristically. A full gap down occurs when the price is below not only the previous day's close, but the low of the day before as well. If a stock's opening price is less than yesterday's low, set a long stop equal to two ticks more than yesterday's low. The difference between a Full and Partial Gap is risk and potential gain. In general, a stock gapping completely above the previous day's high has a significant change in the market's desire to own or sell it.

Demand is large enough to force the market maker or floor specialist to make a major price change to accommodate the unfilled orders. Full gapping stocks generally trend farther in one direction than stocks which only partially gap. However, a smaller demand may just require the trading floor to only move price above or below the previous close in order to trigger buying or selling to fill on-hand orders. There is a generally a greater opportunity for gain over several days in full gapping stocks.

If there is not enough interest in selling or buying a stock after the initial orders are filled, the stock will return to its trading range quickly. If a stock's opening price is greater than yesterday's close, but not greater than yesterday's high, the condition is considered a Partial Gap Up. If a stock's opening price is less than yesterday's close, set a short stop equal to two ticks less than the low achieved in the first hour of trading today. If the volume requirement is not met, the safest way to play a partial gap is to wait until the price breaks the previous high on a long trade or low on a short trade.

All eight of the Gap Trading Strategies can also be applied to end-of-day trading. Using yliya-86.ru's Gap Scans, end-of-day traders can review those stocks with the best potential. Increases in volume for stocks gapping up or down is a strong indication of continued movement in the same direction of the gap. A gapping stock that crosses above resistance levels provides reliable entry signals.

Similarly, a short position would be signaled by a stock whose gap down fails support levels. The Modified Trading Method applies to all eight Full and Partial Gap scenarios above. The other requirement for this method is that the stock should be trading on at least twice the average volume for the last five days.

This method is only recommended for those individuals who are proficient with the eight strategies above, and strategies of intraday trading fast trade execution systems. Since heavy volume trading can experience quick reversals, mental stops are usually used instead of hard stops. Members of StockCharts' Extra service can run scans against daily data that is updated on an intraday basis. This is perfect for finding gapping stocks. This is an excellent source of ideas for longer term investors.

The most profitable gap plays are normally made on stocks you've followed in the past and are familiar with. In simple terms, the Gap Trading Strategies are a rigorously defined trading system that uses specific strategies of intraday trading to enter and exit. Trailing stops are defined to limit loss and protect profits. The simplest method for determining your own ability to successfully trade gaps is to paper trade.

Paper trading does not involve any real transaction. Instead, one writes down or logs an entry signal and then does the same for an exit signal. Then subtract commissions and slippage to determine your potential profit or loss. Gap trading is much simpler than the length of this tutorial may suggest.

You will not find either the tops or bottoms of a stock's price range, but you will be able to profit in a structured manner and minimize losses by using stops. It is, after all, more important to be consistently profitable than to continually chase movers or enter after the crowd. Send us your feedback! Market data provided by: Interactive Data Corporation.

Commodity and historical index data provided by: Pinnacle Data Corporation. The information provided by yliya-86.ru, Inc. Trading and investing in financial markets involves risk. You are responsible for your own investment decisions. Gap Trading Strategies What is the Modified Trading Method? Rising above that range signals a buy, and falling below it signals a short. Although those classifications are useful for a longer-term understanding of how a particular stock or sector reacts, they offer little guidance for trading.

For trading purposes, we define four basic types of gaps as follows:. A Full Gap Up occurs when the opening price is greater than yesterday's high price. A Partial Gap Up occurs when today's opening price is higher than yesterday's close, but not higher than yesterday's high. A Partial Gap Down occurs when the opening price strategies of intraday trading below yesterday's close, but not below yesterday's low.

The red arrow on the chart for Offshore Logistics OLGbelow, shows where the stock opened below the previous close, but not below the previous low. It is important for longer-term investors to understand the mechanics of gaps, as the 'short' signals can be used as the exit signal to sell holdings. A trailing stop is simply an exit threshold that follows the rising price or falling price in the case of short positions.

In this manner, you follow the rise in stock price with either a real or mental stop that is executed when the price trend finally reverses. The eight primary strategies are as follows:. If a stock's opening price is less than yesterday's low, set a long stop equal to two ticks more than yesterday's low. There is a generally a greater opportunity for gain over several days in full gapping stocks. If a stock's opening price is less than yesterday's close, set a short stop equal to two ticks less than the low achieved in the first hour of trading today.

If the volume requirement is not met, the safest way to play a partial gap is to wait until the price breaks the previous high on a long trade or low on a short trade. Similarly, a short position would be signaled by a stock whose gap down fails support levels. Since heavy volume trading can experience quick reversals, mental stops are usually used instead of hard stops. This is an excellent source of ideas for longer term investors. The most profitable gap plays are normally made on stocks you've followed in the past strategies of intraday trading are familiar with.

Then subtract commissions and slippage to determine your potential profit or loss. It is, after all, more important to be consistently profitable than to continually chase movers or enter after the crowd. Sign up for our FREE twice-monthly ChartWatchers Newsletter! Don't Ignore This Chart.




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