How to Trade Gaps in Google (GOOG)

08/27/2010 12:01 am EST

Focus: STOCKS

Scott Andrews

CEO & Co-Founder, InvestiQuant

Google (GOOG) is one of the most popular trading instruments for day, swing, and option traders. With good price movement and trending action, the right setup can be quite lucrative. 

Unlike many individual stocks, the opening gap fade in Google has a higher historical win rate than indices like the S&P 500, NASDAQ 100, and Dow. This is a little unusual since the diversification of indices helps increase the probability of their gaps filling on any given day. Regardless, Google’s consistent gap filling is why many traders play its opening gaps on a regular basis.

As a full-time gap trader, one of my keys to success has been to focus on simply avoiding the historically riskiest setups. Many traders, especially newbies, try to catch all of the winners. In doing so, they invariably catch most of the losing setups too, thereby reducing their overall profitability. For me, I'd rather miss a winner than catch a loser.

Tim Mock is a good friend and a successful gap trader. He put together this short video that shows the historical results of fading (trading the opposite direction) the opening gap in GOOG by day of the week. It shows the best and worst days for trading up and down gaps since 2004.

Watch the video below for more details:

By Scott Andrews of MasterTheGap.com

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