Gap trading

I stumbled upon a gap trading blog today and it has caught my attention. They are promoting a service to provide historical odds on gaps on certain stocks/funds/indices but they have a fair amount of free information on the "how to" of gap trading. The service is really a number crunching system.

I may give it a try to see how it works, they have a trial membership for a low fee and I get the feeling that they are a reputable bunch (one guy really). I doubt that I could setup a study to get the same information myself...like fancy charting services, there will always be some things that will have to be paid for that cannot be done or is too time consuming to do myself. I don't fix my own cars but I do most renovation projects. I pick and choose where to save money based on my expertise.

The monthly is cheap enough if it pays for itself. I figure that with the 14 day trial (I will see if it is 14 trading days) if it pays for the first month then I will continue with it for a bit.

Gap trading is aimed at playing the gap between the closing price one day and the opening price the next day so the trade is in right off the bell and could be finished in minutes, typically less than an hour anyway. This is one trade per day that a gap fade is highly probable, it doesn't setup every day unless I want to play it both ways, fade or run. I tinkered with this early on but found the initial trades were executed poorly and the volatility was rather large...so my limit order choices and stop setting sucked.

The upside of day trading, which gap trading is, is that the trades are complete and nothing rides overnight, the downside is that a huge loss can be accrued over the day due to a number of trading problems as overtrading is possible. Gap trading eliminates the chance of overtrading as there is only one...maybe two trades likely due to the extreme time sensitivity of the trade style. It is a complimentary trading style to my current setup for the same reasons.

With my final P&F trading strategy, so far, I have not realized a loss. I will, but I have more trades in the green than in the red as I speak. I am hoping that I can close some decent winning trades early to overcome the losers, head games really.

Jeff.