Monday, June 21, 2010

How to play gap ups? Part 1

Sorry for the late post dear readers but I have had an extremely busy day and that's how its probably going to remain until the weekend. You guys out there don't need me to tell you that the action today was bearish. So, let's talk about what happened today from a more general perspective. Yes, I am talking about gap ups.

As the regular readers of this blog know, I had posted over a dozen charts yesterday and they all were setting up nicely. I am sure you picked your own favorite or two from all the charts and then saw it gap up big in the pre market. Some of you might have been disappointed at seeing the stock go up without you and open way above your intended buy price. A few of you might have been frustrated too and must have been calculating the missed profits in your head. You didn't want to buy so high, but seeing the stock just keep on going higher, you finally caved in and bought the stock. Within minutes of you buying the stock, it reversed hard and you ended the day quite a lot in red. It turned out you bought the stock at or quite close to the top.

How do I know this? Well, when I was a newbie trader, this used to happen to me more often than I would like to remember. How did I overcome this mistake and get over the frustration of missing out on a big move? Well, my dear readers, what I did was try and understand the nature of the markets. But more on that, and what to actually do on gap ups, in the next post. I am simply too exhausted tonight to continue with the post.

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Take care and good luck tomorrow!

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