I am beginner swing trader trading EOD charts … and I usually panic or don’t take the trade when I see a gap up/gap down in the market, even when there is a B+/A- setup.
For example, if I have a bullish setup today and I am planning to go long near the close of next day after seeing a green candle then on the same day if I see a gap up day I can’t decide if this is good or bad for my trade.
Any guidelines on how I should approach gaps in general would be appreciated. Apart from that what is a healthy mindset towards gaps in the market ?
In a trending market, Gaps are hard to fill. In a range bound market, Gaps are filled easily. In the former, you go with trend. In the latter you do contra.
JS stands for Jane Street. He’s talking about moves like today, where entities like Jane Street buy options and then move the index to where they want - almost exactly at 15:00 - usually on expiry days. This creates massive profits for such entities at the cost of retail. Today demonstrates that move on Sensex expiry. Concentrated buying or selling to “mark the close”. The moves made by such manipulating entities is collectively called as Jane Street move, named after the entity that was caught by SEBI and published a detailed paper on.
Wow that’s interesting, I usually prefer to trade around the closing time after checking it’s a green or a red candle day but damn, I’ll look into this thanks for the info
A gap by itself isn’t automatically good or bad. It just means new information entered the market overnight.
If the stock gaps up beyond my planned entry, I avoid chasing because the risk-reward usually becomes worse. I wait for the price to settle and recalculate the entry, SL and position size. If it gaps down, I first check whether the original setup or support level is still valid.
It helps to create separate rules for gap-up and gap-down trades. I tag them separately in EdgeLog and review the results after enough trades. That gives a better answer than reacting emotionally to each gap.
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