At the expense of sounding redundant with my review of “gap-fade” trades, I’ll probably only be doing one more post highlighting this trade type. I’ve had a couple that I went over when you shouldn’t trade the opening gap, and below I have a review of today’s gap-fade that I partook in successfully this morning. Tomorrow, I will show a past trade (from last week) that didn’t go as well, despite following all the criteria shown below. After tomorrow’s post, you should have everything you need to make solid and informed decisions when contemplating whether to fade the market open or not.
Let’s see how this trade setup did against my gap-fade checklist…
1) S&P under 10 points? Yes
2) Is the gap being driven by news? (earnings, economic report, etc.)? No
3) Is the gap large enough (more than 1 or 2 points) for me to trade? Yes.
4) Is volume reading on the future indicating there is a lot of support for the gap at the open? No
So as you can see it met all four of my criteria for fading the gap this morning, and it turned out to be nothing but successful. Good job out there to all those who took the plunge with me this morning!