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Item Number: 4600-E
Date Published: 2008
Publisher: Traders Press, Inc.
Length: 66
Format: Electronic Version
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Available for Immediate Download.
Understanding Gaps
Price: $ 19.95
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Author(s):
Scott
Andrews
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Scott Andrews is president of "Master The Gap, Inc." an online service that uses an innovative "zone" approach and historical probabilities to help traders more profitably play opening gaps. Demand for Mr. Andrews' work from other traders led to the establishment of "MasterTheGap.com."
In 1995, he co-founded SciQuest, Inc., to streamline the procurement process for the healthcare and academic organizations. As CEO, Mr. Andrews took the company public in 1999. Fueled by his firsthand experiences with Wall Street, he became a student of the markets. Attracted to the compelling bias and simplicity of opening gaps, and through exhaustive research, Mr. Andrews ultimately created a novel pattern recognition strategy. He has spoken at many financial and internet conferences and is a decorated aviator of the first Gulf War. Mr. Andrews earned his MBA from the University of North Carolina and graduated from the United States Military Academy (West Point).
Synopsis:
Electronic VersionUnderstanding Gaps is part of an ongoing series of publications of Traders Press Inc®.
Each book in this series is intended to provide traders with an “up-close” look at a topic
which has had little in depth coverage in other trading related literature…and to provide a
source of additional information as well as a listing of other sources and articles from
which the reader may learn more about the topic covered. Description:
The idea for this latest addition to our “Understanding…”series was born when I
had the pleasure of meeting Scott Andrews at the New York Traders Expo in February
2008. It became readily apparent from our conversation there that he had spent a great
deal of time and effort studying opening gaps, a topic about which I had seen little written
and which I felt would of great interest and value to fellow traders. In my opinion, Scott,
“The Gap Guy”, is one of the world’s foremost experts on gaps and how they might be
profitably traded.
It is our hope that his research and comments on gaps will help you to advance
your skills and knowledge as a trader, and will prove a valuable resource to your trading
library.
Edward Dobson, President May 21, 2008
Traders Press, Inc.
Greenville SC Table of Contents
- INTRODUCTION 1
- Why I Love Trading Gaps 2
- WHAT ARE GAPS? 4
- The Basics 4
- How To Use & Profit from Gaps 9
- The Promise of Gaps 10
- The Paradox 11
- CREATING A PROFITABLE STRATEGY 13
- Gap Size 13
- Gap Zone 14
- Seasonality 15
- Stop Size 16
- Target Optimization 18
- REAL WORLD EXAMPLES 20
- How I Trade Gaps 20
- Gap Fade Examples 22
- “Go With” Example 35
- “Fade the Fill” Example 37
- GAP TRADING TIPS 39
- GET STARTED! 41
- Conclusion 44
- GLOSSARY 46
- BIBLIOGRAPHY 49
Book Review:
In the parlance of technical analysis, a gap is usually defined as occurring when the opening price of today’s trading session is above or below the close of the previous day’s trading session. This is a common occurrence in virtually all active markets, to include stocks, futures, ETF’s, and other trading media. Gaps have always fascinated me as a trader, due to the well known fact that most (but not all) opening gaps are usually “filled” the same day they are created. This high probability occurrence gives rise to the temptation to “fade” a given day’s gap with the intention of closing the position when (and if) the gap is filled, by price returning to the previous day’s closing price level.
Nearly 40 years ago, as a futures broker in New York, I remember like it was yesterday making trades for my own trading account and for clients in which we would “fade” opening gaps, hoping to profit when they were filled. Most of the literature I’ve ever read on gaps has been quite superficial and has offered little if any advice on how to actually trade them.
It was my privilege and pleasure to meet Scott Andrews, the self-proclaimed “Gap Guy” (author of this book) at the Traders Expo in February, 2008. We had a number of fascinating conversations about his study of and work with gaps at this show, which led to the publication of this book by Traders Press.
Scott, a West Point graduate and Army veteran, shows the same degree of discipline in his relentless pursuit of knowledge about gaps as one might expect from one of his background. “Understanding Gaps” gives the benefit of his painstaking and thorough research into gaps and how they might be profitably traded. He starts with an explanation of gaps, what they are, and examples of several types, all with illustrations. Most existing literature on the subject stops here….which is just the bare beginning of the coverage in this valuable and informative book. The results of extensive research into gaps are presented, and cover a myriad of approaches to analyzing them…including seasonality, day of the week, gap size, where the gap occurs relative to the previous day’s range, and many other aspects…with exact probability studies for each approach.
The balance of the book deals with Andrews’ own approach to trading gaps, and is replete with numerous examples and illustrations of trades he has personally made. He offers useful counsel and observations based both on personal experience and on his research which will provide solid guidance for traders interested in learning a methodology based on gaps. It should be noted that the entire focus of the book is on trading the opening gap in the S&P E-mini futures. Andrews ignores the “night session” and considers an opening gap as the difference between the close at 4:15 PM EST and the opening the next morning at 9:30 AM EST.
This book reads easily and flows smoothly, is well written and will serve as a valuable resource for serious traders. A detailed bibliography lists extensive additional resources and information on the subject of gaps. Andrews’ own website is a valuable resource and is cited in the book. Additional information and table of contents are available at http://www.traderspress.com
Review by Edward Dobson, President
Traders Press, Inc.
Greenville SC
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