Fading The Gaps......Intra day!!!!

Since now a day we are either opening gap up or gap down so I thought I would share a strategy how to profit from these situations. I am myself learning how to Fade gaps and finding these setups as one of the best Day Trade opportunities. Here are a few simple rules to trade intra day gaps.

• The first trade we generally look at is to fade the gap. If we open gap up, we wait for the price to break its recent low and enter with a tight stop loss just above the high. The idea is that the price will close its overnight gap. The target is more often, the previous close. It’s vice versa in case of a gap down.
• The second trade is to enter in the direction of the gap after the gap is filled. The price tends to retrace back sharply after filling a gap. This time we target today’s open.
• If the price on gap up or gap down retraces a bit and makes no serious attempt at gap filling, then one must trade aggressively in the direction of the gap. The ideal entry would be, when the price breaks out of its open and also the high (gap up) or low (gap down) of the day.