A trading strategy which works in every market, whether trending or in consolidation. When a stock opens higher than the previous day’s close it is called a closed gap up. To take advantage of the situation we short the stock as we know that the gap which has been created (difference between previous high and today’s open) will fade, we need to short (sell) the stock in intraday.
The rules for the strategy are as follows :
- Short 2 highest closed gap up stocks.
- Divide the capital equally among the two stocks.
- Trade only those stocks which can be traded in futures and options.
- Short (sell) the stocks at 9:25 a.m.
- Keep 2% stop loss from your entry.
- Exit the position at 3:15 p.m.