Short-Term Gap Trading by Jay Kaeppel
Using one of the most widely recognized market events, this simple technique provides a useful framework for any trader looking to develop a short-term method.
Every trader looks for an edge in the markets. Sometimes that edge might involve a complex set of mathematical calculations, while at other times it might involve a gut feel for a situation that the trader has experienced before. For others still, it might involve:
a) A simple technique that is
b) Combined with the recognition that the technique will not always be correct, and
c) Understanding that risk controls and money management methods must be included in order to
d) Maximize profits when things go as planned and
e) Cut losses when they do not.
To illustrate this concept, letís talk about one such technique using one of the simplest market events, commonly known as the gap.