Stocks

The Real Gap

BrandonWendell
Brandon Wendell
Instructor, CMT

First, I would like to give thanks to all of the firefighters and other emergency crews who worked for hours in grueling conditions to combat the wildfires in San Diego County.  For those students who were concerned for me, the fire was less than two miles from my house but then the winds shifted and moved it away.

fire night

Far too many investors and traders gain their trading knowledge from books, television or the internet.  The problem with many of the sources is that they are simply regurgitating the same old technical or fundamental information that has been misused for years.

One of the big misunderstandings that cost investors and traders many losses is trading gaps.  The traditional line of thought states that when price returns to the prior day’s close, the gap has filled.  Most amateur traders use that point as an opportunity to enter a trade as they expect the price to reverse from the previous close.

As they quickly discover, this is not the real demand or supply zone and they get stopped out.  As Online Trading Academy graduates are trained to be professional traders, they will wait for the real demand or supply zone before entering a position.

I treat gaps as if they were simply large candles.  This allows me to better identify the true supply or demand zone for a higher quality trade.

bwendell-20140520-vmc-real-gap

Treating the gap as a candle and looking for the real origin of buying or selling pressure will protect your money and offer you much better trading opportunities.  There are also four types of gaps.  Knowing what type of gap you are dealing with will also increase your chances for success in the markets.

Learn these types of gaps in an Online Trading Academy Professional Trading Course.  After all, if reading a book on trading would have made you successful already.

Brandon Wendell
bwendell@tradingacademy.com

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.