Gap up/Gap Down Strategy for WSDT
Day trading strategies for WSDT Nov 07, 2019
Gap up/Gap down strategy is a widely used day trading strategy that consists of two major components.
Gap up occurs when the market opens up, which is at a price higher than the previous day’s closing. Gap down simply means when the market opens at a price lower than the previous stock.
When does Gap up/Gap down occur?
Gap up and gap down primarily occurs due to a news event that affects the price movements of stocks.
Usually, when there is a gap up, day traders tend to sell their stocks. This means the gap that was created previously as a result of the price difference would be filled.
On the other side, if there is a gap down, the gaps would be filled because day traders usually want to buy these stocks. Gap downs usually increase the demand for stocks.
Gap up/gap down, as I hinted above, is fundamentally driven by news or major events that buzzes the stock market.
Gap up is also know as a bullish gap while gap down is known as the bearish gap.
There are various types of gaps in the gap up/gap down strategy.
The types of gaps
This type of gap occurs during the commencement of a trend. The price breaks away and creates an interval from the previous closing.
There is more efficiency in a breakaway gap when placed side by side with the previous trend.
The runaway gap happens during the middle of a trend. This indicates that there is more room for trade on the stock market.
Identifying a runaway gap can be done by analyzing the overall trend in the markets. It is more effective if it coincides with a breakaway gap. It is further ascertained by an existing trend.
The runaway gap should give you a further indication that there is more room for prices to climb up.
This type of gap is a route to the final step. At this point, there is a gap created after the establishment of the trend.
This is very important because it indicates the last run before prices begin to merge. It can also indicate a change in the trend. This does not fully indicate that the trend will reverse.
Pros and cons of using the Gap up/Gap down strategy
- Gap up and gap down is relatively simple and easy to use
- Fits well in stable market conditions
- It is a good strategy when used to during a major buzz on the financial market
- It allows traders to build an automated trading solution based on market conditions
- Gap up/Gap down strategy cannot be used in every market because some of them run for 24 hours
- It is blunt when your broker doesn’t provide you with a good fill of prices
- Only stocks with good volumes are reliable with this strategy
How was Gap up/Gap Down used in WSDT
The gap up/gap down strategy was widely used in the WSDT. It helped competitors to gain a good grip on the market.
The market was quite choppy during the period in which the WSDT I was hosted. Competitors needed to use a strategy that runs well on such terrains, and Gap up / Gap down was a good fit for most of them.
The WSDT offers traders a good platform to connect with other day traders with varying trading experiences. It gives day traders a golden ticket to a myriad of opportunities for day traders to sharpen their skills and be mentored by world-class trading professionals.
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