Overnight risk and reward

Posted on October 28, 2005
Tags: General rant |

I do mostly position trading these days (which explains why I don’t post intraday). Trading longer time frames has its own quirks as well as risks and corresponding rewards. One of those is gaps, which can either go your way or against you. For some reason I find that gaps on my short trades are actually typically in my favour while gaps on long trades are usually against my position.

AMLN Long

EL Short

Comments

3 Responses to “Overnight risk and reward”

  1. Michael Taylor on October 28th, 2005 5:50 pm

    Interesting observation. Thanks for sharing. I might do some testing on your idea.

    So, basically I’m assuming on your longs you’re buying on some new high…and notice gaps that do occur often to the downside…against your position.

    On shorts you’re buying on some new low…and notice gaps often occur to the downside…going with your position.

    I’ll have to test all gaps (major) that do occur in the market…what percent are up-gaps and what percent are down-gaps. This might prove very interesting.

    Thanks again,

    MT

  2. eyal on October 28th, 2005 10:48 pm

    Would be interesting to see what you come up with. Other recent similar short plays were DTPI and AVP with a very similar pattern.

    As you said I scan for new highs/low and also add volume as well as an increased weekly range.

  3. Michael Taylor on November 1st, 2005 5:13 pm

    Eyal, I’ll definitely share what I find. Just might take awhile. I’ve been so busy lately with the current edge I’m working on. After I finish up the current project…I’ll begin testing this potential gap bias. Hopefully in the next few weeks.

    MT

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