The gap fade

Today was a great day to play the longer term day trade, in fact I thought it might be best to just place a short at the earliest peak and let it run... but I don't have the patience for that right now. It certainly would have been a good application for some sort of moving stop but probably not a VTSO as that would have gotten hit pretty early in the day.

The setup was classic. I entered my pivot points, 15 minutes, checked the trading price of gold in other markets, 45 seconds and decided that the day was going to be a huge gap up and run or a fade...given the size of the gap and the trading of late I was putting my money on the fade.

This is an example of why I like the day trading arena. Time spent researching...45 seconds... as the pivot point setup is a technical tool. I know of traders who get up early, 4AM, to research the markets, check out scans to determine what stocks they are going to trade, set those stocks up in their platforms, then wait anxiously until the market opens and hope that all that time spent is worth it.

Most, in fact the vast majority of those traders are not trading right now either because the market is not reacting as they think it normally should (whatever normal is) or they have lost a lot of money and cannot stomach it anymore. A percentage I keep stumbling across is 3% of all traders ever make it consistently. With the influx of online traders right now that makes a lot of easy money available for those 3% that know how to pull it out of the market.

I feel that the research adds a bias to the idea where the price is going to go.

Consider that it can only really do one of two things, in the big picture. It can go up, it can go down, it can wallow around and churn while not really going anywhere. So all the research and watching for a slightly better then one in three guess is not my idea of a good time.

If I am wrong off the start, I lose a few bucks then change my plan. I have not invested a lot of time in deciding which way it is going to go so I won't get caught in the trap of wishing and wanting it to go my way, I have no way, I just follow the price action.

For the record, the gap up was a guaranteed move, there was next to a zero percent chance of it not jumping at least $2 off the start given the price of gold, and it went over $3. The aftermath was just a hunch and best guess. I would put a 70% or better chance of an overall fade in the current market for such a jump. Had it gapped down I would have put a similar chance of the gap NOT fading and the price continuing down, under similar market circumstances.

Back to the day.

The gap started a quick momentum move in the direction of the gap which quickly peaked and fell, the first short entry ...which I hesitated on and missed...no big deal (which is one of the other reasons I like day trading, the next setup is only minutes away, not days).

Truth be told I fumbled the first couple of prime entries, the first short, the resulting long for the rally, then the very next short...I need to close my door so nobody can chatter at me while I watch these setups but mainly I need to tailor my limit order entries to not be quite sot tight as I try to squeeze every penny out of the starting price. I refuse to chase the price, I want it to come to me, so I miss a few and usually by pennies.

I ended up 1.07% net gain, still meeting my goal but missed at least that much off the start.

Shorting the top would have me closer to 2% after just riding it until sometime after lunch. The day is not done yet but I doubt that I will trade any more as the action is slow and unpredictable now...although it may still drop to fill the morning gap, just not for sure.

I won't speculate as to how much I really might have made had I hit the trades that I setup initially as I just didn't make them.

Just another fun day in the market.

BTW, I was done by about 1030h. Another reason I don't like the typical DTing "idea". I make my money or take my losses for the day early and get the heck out, I have other stuff to do for the day... although I would love to hit a really nice day for letting trades run and sit it out to make some serious cash...another time though.

Jeff.