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inthemoneystock (< 20)

Day Trading Lesson: Understanding The Gap And Slow Day



April 20, 2011 – Comments (1)

Often day traders watch the markets for 'gap and go' trading sessions. This is when the S&P 500 futures trade higher 7.0 – 10.0 points before the opening bell and rallies throughout the rest of the trading session. Often day traders will look for small pullback and jump on board for a move higher into the close.

Today the market made a 'gap and slow' day. This is when the market gaps higher by 15.0 to 20.0 points at the open and then stalls out for the rest of the session. Many inexperienced traders will usually buy the highs thinking the market is about to break out. Wrong, the market will usually trade sideways and sometimes even drift slightly lower into the end of the session. Day trading requires experience. Traders should not just guess or assume, that is gambling.

Day trading is a very calculated endeavor and it is imperative to know what type of trading day it is. For example, today the SPDR S&P 500 Trust(NYSE:SPY) made a high around 10:00 am EST, since that time the SPY has traded in a 0.30 cent range for the rest of the day. Welcome to a gap and slow day.

Nicholas Santiago

1 Comments – Post Your Own

#1) On April 20, 2011 at 4:43 PM, davejh23 (< 20) wrote:

Agreed.  Small caps opened nearly +2% and then traded in a tight range all day...much lower intra-day volatility than on "normal" trading days.  Gaps like this typically get filled...a better opportunity to short for a quick gain than to go long for further immediate upside.

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