I do very much like a large Gap Open with a strong Opening Drive.

<image: Opening Structure Trap>

But do you know what's better than a large Gap Open with a strong Opening Drive?

How about a large Gap Open with Opening Drive failure and reversal to the opposite direction!

<image: Opening Structure Trap>

We have discussed traps at (or just before) the RTH Open quite a lot over the last year.

<image: Market Open Traps>

But if I recall correctly, the vast majority of these trap examples occur within the opening 1-5 minutes, or so.

The concept today is the same. The reason it works so well is the same.

IT TRAPS SOMEONE IN A LOSING POSITION.

It just happens over a slightly longer time period.

<image: Opening Structure Trap>

There's a key point here related to trading success. A big part of success comes from minimising damage during those times when your plan is out of sync with the actual market conditions. Conduct your analysis and trade accordingly. But always keep in mind the following: (a) What do I need to see to know I'm right? (b) What conditions will confirm I'm wrong, or at least raise some doubt and allow me to contain risk?

And by minimising damage I mean not just to your account, but also to your mindset. Both are essential for profiting from the subsequent momentum drive, once the trap is sprung.

Let's step through the trade sequence.

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

<image: Opening Structure Trap>

What is better than a large Gap Open with a strong Opening Drive?

A large Gap Open with Opening Drive failure and reversal to the opposite direction!

But only if you don't destroy your account or mindset, during the times when you're wrong.

Happy trading,

Lance Beggs

 


 

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2 Comments

  1. Dear lance,
    I would like to know your point of view about Elliot wave. It seems the philosophy of Elliot wave pattern is based on market psychology and it might be helpful when we gage the market sentiment with your method at the level. It might give us more reason base on market psychology to take a position.

    1. Hi Hadi,

      There are some elements of Elliot Wave that I’m ok with (measured move concepts for example) but the whole wave count thing causes a problem in being far too subjective. And not something I can believe in sufficiently to structure a trade plan. So it’s not a topic I have explored in depth and not one I could really comment on. Isn’t there an old saying something along the lines of ask three Elliot Wave technicians what is the current wave count and you’ll get six different opinions? It’s not for me.

      But that being said, there are traders who swear by the methods. So if you’re finding value, by all means explore it. It may well be that I just didn’t give it enough time.

      Best of luck,
      Lance.

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