HOW to TRADE GAPS, Technical Analysis initative fom SOKHI TEAM [ IMP ONE SEAT LEFT to get Lifetime Membership @ Rs 27,500 ]

Technical Analysis : Hows to Trade Gaps

Gap is a very common market variable  used by technical analyst . A Gap is a very important chart pattern without which the study of charts for technical analysis is incomplete . Gaps shows that no trade took place  at that certain time . Gaps occur when prices jump in response to sudden imbalance of buy or sell orders . When the open of day 2 is greater than the close of day 1 , it is referred to as Gap Up , similarly when the open of day 2 is lower than the close of day 1 , it is called as Gap Down .

Gaps as Support and Resistance

Gaps can serve as support and resistance levels . If greater volume occurred after an upside gap , it indicates very strong support . If greater volume occurred before the gap , then support is less strong . The reverse is true for resistance levels .

The below chart shows how the gap up level acts as support .

Another chart  of ABNuvo shows how the break down level acts as resistance , the price fails to move up the gap down level

How To Trade Gaps 

Gaps can occur in the daily chart as well as in the long term charts . Gaps in the long term charts are only considered as valid , each valid gap should have increase in the volume . Gaps are not generally used for day trading . Below are most common rules of gaps trading strategy .

1. Trade when the market breaks out of a long trading range with the increase of volume ,  If prices have gapped to the upside , buy and place a stop below the lower rim of the gap . If the price have gapped to the down side , sell and place a stop above the upper rim of the gap

2. A valid gap must be confirmed by a series of several new highs or lows. If the prices refuses to reach new highs or lows in the direction of gap , exit your trade .

Technical indicators can help to calculate the price target after the gap has occurred. You can use any charting software  for this .

Also see these 5 videos if u want to trade in HIGH ACCURACY :

https://www.youtube.com/watch?v=NqNKQ3Vzn8k       (Video 1) Why do all Investors loose money ??
https://www.youtube.com/watch?v=v9zTg3OI7Vg  ( Video 2 ) How you can be expert trader yourself ??
https://www.youtube.com/watch?v=oc7l4gmZ71k  ( Video 3 ) What is Negative and Positive Divergence ?? How you can profit from it ???
https://www.youtube.com/watch?v=uUUbHWRcz2k     (Video 4) GOLDEN RULES for INDIAN STOCK MARKETS - Must Follow to PROFIT
https://www.youtube.com/watch?v=DOyVbKWjMCE    ( Video 5 ) Always trade with a PLAN

Do Note I am not Committing you any HUGE GAINS or UNREALISTIC GAINS (Like other do)
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