Monday, February 3, 2014

learning to trade gaps

 Traders need to learn the gaps and what are the trading opportunities associated with stock gaps at the open of trading. You need one thing to watch as you are looking at whether the gaps will fill quickly. The market makers will move a stock's price up or down before the market opens so traders need to be careful. After 30 minutes or so the stock price should stabilize and show some kind of trend.  Stock Gaps are caused by imbalances between buyers and sellers. If there are no sellers and an overwhelming amount of buyers want into a stock, they will be forced to raise their bid to the area where there are sellers so they can satisfy their demand. The reverse is true when sellers overwhelm the buyers.
 This usually occurs when there is news on a business or the stock markets have some kind of economic news. In trading, a trader should center their decision to buy or sell based on the price in relation to supply and demand. Understanding gaps with the supply and demand type of trading offers a powerful price direction indicator.  Breaking the demand level on the gap shows that the sellers could not locate any buyers willing to purchase at the former price level. This is extremely bearish and as a consequence, the price continues to slide. The opposite reaction would occur if the price gaps into, but not past a supply or demand level or support and resistance.
Stock and Forex Opening Gaps Trading