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Gap Trading 1: Upward Gap on a downtrend


 

 

Gaps (Ku) are called windows (Mado) in Japanese Candlestick analysis. Gaps can often reveal powerful high profit trades and when combined with candlestick signals, and other indicators, often  provide valuable profit-making set-ups. Hence, Gap trading techniques should be considered and incorporated in the arsenal of any serious trader. The ability to understand and read the bulls and bear forces at work within a gap signals will allow traders to take a position to their advantage.

One of the common scenario of gap play is to identify Upward Gap on a downtrend. The gap combine with strong volume often signals the temporary end of a downtrend and provide excellent opportunity for a long position trade. Refer to the chart of Centex Corp below. After a prolong downtrend, the gap appears after a pair of bullish engulfing pattern candlestick with high volume. Traders can look to adopt a long position from this point. Often gaps are support  and resistance zone. Profit taking after a gap is inevitable but at the very least, a temporary trend change is established.

forex/stock/gold/oil trading

Short Description : This article talks abt how to use gap as a reversal signal on a downtrend for a trading setup.

Author : Tradesman

Website : http://stocktradezone.com

Bio : Tradesman is a part time trader whom trades in various exchange on NASDAQ, NYSE, Hang Seng and SGX ( Singapore Stock exchange )

 

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This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Information, charts or examples contained in this lesson are for illustration and educational purposes only. It should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer.

 




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