For help with using this guide visit Fading Opening Gaps 101.
Quick Guide:
Currently we have two types of trades: Before Gap and After Gap.
Both trades depend on what zone the market opens in the morning. This zones are H, HO, HC, OC, CO, OL, CL, and L. The letters H, O, C, and L refer to High, Open, Close and Low of yesterday. Zone H means anything higher that H. HO means anything lower than H but higher than O and so forth.
Before Gap trade is very simple. If the market opens at an area that has a set up signal (for example "Buy market at open") we say the trade is triggered. We enter this trade at open and immediately set our stop and target accordingly. Our target for Before Gap trades is always C(the close of yesterday).
After Gap trades are very similar except that our entry is not immediately entered at opening. The entry will be when the market closes the gap(i.e. it moves up or down depending on the direction of the gap and reaches the close of yesterday). Once the close of yesterday is hit, we enter in the direction of the move that closed the gap and we target about 4 points but adjusted per daily pivot levels. You can always enter your order for After Gap right at the open but it has to be in the form of "Buy Stop" or "Sell Stop" so it won't execute until the gap is closed.
You can also use the daily pivot levels to adjust your stops and targets according to your personal criteria and risk/reward acceptance with the goal of doing better than standard stop and targets.
