I-Ching says:”A hot fire burns twice.”
Our good friends Alexander Elders and Linda Rasche use this idea in technical trading as such: A radical momentum surge will lead to another price move in the same direction after a minor correction.
A Gap opening is that type of price event, a surge of emotion either positive or negative driving the prices away from the previous day’s closing price to create a gap that gets follow through.
Traders have debated since over the last 30 years or more whether the gap should be traded or faded. I have long suggested that the most traders get sucked into phrasing the question incorrectly.
When it comes to gaps the questions are when should I play the gap, when should I fade the gap and when should I ignore the gap. The fully developed strategy called Gapster determines when to play the gap in the direction of the gap through the use of our in-house market context indicators, and it does so convincingly.
TMT combines that with the New Turtle Trader on the e-Mini Russell.
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