Intraday Follow-Up of Gap Trades
Finally, another aspect of
the gap trade is the trailing stop loss. For those who are active day traders,
a trailing stop loss method may be a valuable addition to the gap trade and/or
the multigap trade. Use the guidelines presented previously in this book to
implement a trailing stop loss.
Summary
The basic gap trade as I
have previously presented it in The Compleat Day Trader and
in this chapter is a basically sound method. It performs best in S&P
futures. A variation on the basic gap method is the multigap method. The
motivated trader will take a little time and effort to find the best
combination of the major variables associated with both the gap trade and the
multi-gap trade. These variables are length of days in gap window, the size of
the gap, the size of the gap penetration, and the stop loss. Another effective
method would be to use a trailing stop loss once a gap trade or multigap trade
has been entered. While the trailing stop loss may decrease accuracy slightly
in some cases, there are markets in which accuracy increases, as well as
average profit per trade.
Category: Methods of Daytrading
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