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Trading opening stock gaps by D este
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Trading opening stock gaps |
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Investment
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There are several reasons why the markets gap up in the morning at the open. Markets gap up because there are more willing buyers at the open of the market than there is available supply at the prior day's closing price. They gap down because there is more willing supply at the open than willing demand at the prior day's close. Stock market prices are almost always at price levels where there is a supply and demand imbalance at the open or because a stock has had news after the closing bell. Traders need to remember the profitable market investor simply finds markets where price is at levels where supply and demand are out of balance and trades the stock back to price levels where supply and demand is in relative balance. Watching that order flow can help to see where prices were going to turn. Traders need to learn to read their level II and where market makers are sitting. When you have twelve buyers and six sellers at a certain price, all equal size, as soon as the sixth seller sold, price had to rise. Watching the orders in your level II makes this easy to see. Knowing exactly what this picture looks like on a price chart makes it even easier. The key is to not look at candles on your screen as red and green pictures and patterns. You must understand what is happening behind the scenes. Whether you're trading Stocks, Futures, Options, or Forex, the logic and rules never change. Traders can combine volume with the candles themselves. Volume charts are created in the same way as normal candles. A new candle is created only when a certain number of shares are traded. Time is not an issue. Until enough shares are created to complete the current candle, it will not close and a new one will not be formed.Trading the opening gap
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