The S & P 500 e-mini generally provides the necessary activity before the opening for operating with the spring gap. This instrument 24 hours often extends a trend set between 8:30 and 9:20 am, ET (Eastern Time), one that usually sets the tone for the rest of the morning, setting a potential rollback to violent opening.
Recognizing the trend is key when a potential elastic gap is identified. It requires that there is a tendency for at least three days. Movements that have remained intact for a week or two are better candidates (as they must be in the territory of overbought or oversold in the longer term charts). But this is an extremely fast operation and does not require a large movement to provide a solid ratio of risk-to-reward.
The entry must be made within the first 15 minutes (between 9:30 and 9:45 a.m. ET) and is usually completed within the first hour. Traders must add Bollinger bands to a continuous 60-minute chart and a graph of 2 minutes only session of the day to raise short-term posture. When prices violate the bands on both charts simultaneously, the elastic gap has been activated.
As shown in Figure 3, for July 21 e-mini was through extended rise, covering almost 80 points less than seven days trading. This is an ideal trend for the elastic gap because it can produce a volatile, short-term correction that few will find or bother to play it. Additionally, if you look back the daily chart, the trader also can see that the market has reached the upper Bollinger band at 957 in this time window long term
On the morning of July 21, the index rose during the period of 8:20 to 9:30 a.m. ET, breaking high above the upper Bollinger band at 952 in the continuous 60-minute chart. Gaining Early in the futures markets will force the spot market rates also open upward, and this is easily visible on the chart two minutes from the cash market.
While the gap from the previous close (949) to the opening 9:30 am (954) on July 21 is not huge, the combination of what happened after a large, movement and positioning several days out the upper band of the Bollinger Bands on several windows of time has put on the table a strong counter-trend movement. The timely entry provides operators in intraday rapid resolution, allowing capital placed in this operation can be used later in some other market during the session.
Enter a trade with the spring gap is not an exact science. However, when the windows of larger time and trends are aligned with each other in a manner similar to July 21 (powerful trend on daily charts, violation of Bollinger bands on the chart 60 minutes from 8:30 way at 9:20 am) the decision to operate has been taken. Now only minimal evidence in the graph of 2 minutes is required to justify the entry in anticipation of the spring effect should drag the market a Bollinger band to the other.
At 9:36 am on chart 2 minutes completed the pattern rollback “three black crows” in Japanese candles (see Figure 4) and the trader must enter into operation immediately, most likely to be executed between 952 and 953. as traders are watching a quick and sharp correction, they must put your stop above the maximum opening (954.50) at 955.00 and set a target of 61.8 percent gain in the retraction movement precedent (which began on the evening of July 20 at 940 and formed roof opening July 21) at 945.50. This trade provides roughly a risk-reward ratio of 2 to 1 and takes less than an hour to complete.
Betting against the trend is not for the faint of heart, but sometimes accommodates the trader seeking quick results, especially if the graphics settings suggests entering a counter-trend trade. Due to momentum, this approach should be out of the trade or move in the direction favorable to the trader immediately.
Look back to find a trade that worked superbly always easy, but must be repeated, one must choose the features that guarantee a good ratio of risk-to-reward. An extended trend (visible across multiple time windows) and reliable volatility are the necessary materials for this trade; however, it is the measured stop and profit target that will allow you to succeed.
FIND YOUR NICHE
There are many techniques available for operational intraday, but the key is to use one with which you feel comfortable. Just because a trader can effectively attack the market with a certain technique does not necessarily guarantee you that others can succeed with it.