Buyable Gap Up

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How to Trade or Invest using GAPS?

Most scary thing in the world of 'stock market' is 'gaps-up'. it becomes very difficult to manage trade when security opens 'Gap-up'. So what is the right way to trade gaps or take position on the basis of gaps.

There are three rules that must be check before trading gap-up market.

1. ATR :  Check 40 period ATR before gap-up. The price move must be at least 75% of that value.

2. Volume : Volume must be 150% of 50 DMA volume.

This Gap-up must be occur in constructive consolidation or an uptrend.

Let's look at the chart and understand.


Let's look at the chart. 

There is a Gap-up

40 period ATR before Gap-up was 111.89. Price should Gap-up at least 75% of ATR that means 83.91. We can see price Gapped-up 245 (i.e. 32,450 - 32,205)

Volume is 150% or 3 times. 50 SMA Volume is 162.40K and Gapped-up volume is 527.42K

All three conditions are meeting the criteria. Now where to entry and what should be your stop loss is clearly mentioned on chart. Trail you stop loss when you are in the favour.




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