Good stock traders can make money if they are right only about 40% or 50% of the time. If you get a trading system that is right 60% of the time, that's huge. Really huge. It's easy to make money with that kind of a system. But what if you had a system that is right more than 85% of the time?
Could you make money then?
I'd have to say yes! That's what you get when you trade the gap. Most gaps close. The numbers vary, but somewhere in between 85% to 89% of all gaps will close (and close quickly).
That's a really good percentage, and given that, if there's a way to take advantage of that, you should.
Well you can. Here's how. When the market opens up, look for major stocks that have gapped. When you find one or two, watch it for just a bit.
Is it starting to close the gap?
Is the price confirming that it wants to close the gap?
If so, that's your trade. Go in and profit.
It is very important that you place a stop. You see, some of the time (11% to 15% of the time), the price will move away from the gap and not close it. It's those times that the gap was signaling that the market was very strong.
You don't want to get eaten alive in those times, so you must have a stop.
You don't need a large stop. Place it just several cents above the top of the gap. Really, if the trade isn't going your way early, and quickly, it probably won't be going your way at all.
Get out quickly (with your stop) and move on.
Do you want to learn more about how I do it? I have just recorded a 25 minute CD called "How To Pick Winning Stocks - The Secret Formula"
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Source: www.isnare.com
