How to Master and Trade the Gap

06/20/2008 12:00 am EST

Focus:

Scott Andrews

CEO & Co-Founder, InvestiQuant

A former helicopter pilot, Andrews used his analytical and mathematical skills to create a unique pattern recognition strategy to take advantage of and profit from the price differential between the market's previous close and its next open.

Andrews told traders that gaps are defined by the prior day's open, high, and close. He noted that more than 72% of all gaps in the S&P 500 futures have been filled in the last 10 years, adding that profits are much more probable if you develop predetermined targets.

Additionally, Andrews gave traders some specific advice regarding the location of the trade, trading zones, optimizing targets, and holding periods.

On the subject of stops, he advised attendees to stay away from trailing stops and to always use a stop when trading futures.

Traders looking for ideas were amply rewarded as Andrews gave some specific examples of trades and how to optimize their targets for each zone.

Lastly, he strongly recommended both back- and forward-testing to hone your trading strategy.


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