Trading a gap up day.

Well, the post title says it all. The concepts are useful for day traders, but then again, trading concepts can be educative for all traders. So here I go.

Once a market opens gap up, there are three possibilities for the day’s action: 1. The market continues to move higher. 2. The open is roughly the high of the day and the market then makes a bearish reversal and, 3. The market drifts throughout the day around the open.

Let us start with one number: the Average True Range for Nifty futures. Currently, this is 75. This means, on an average day, futures move 75 points between high and low. Once we have this number, our task becomes easier. With a gap open, we add 75 to Friday’s close (6034) to get the likely high point, which is: 75+6034 = 6109. Remember this is the average, but that’s what we have to work with.

If the gap open takes the open near 6109 then scenario 2 is likely. If the open is near Friday’s high then scenario 1 is possible. If the open is somewhere in the middle of Friday’s high and 6109 then scenario 3 is possible. All of this is anticipation. But doing mental scenarios makes life easy.

Ms Rousseff -the world’s most powerful woman

Ms Rousseff, the daughter of a Bulgarian immigrant to Brazil and his schoolteacher wife, is likely to be elected president of Brazil on an election to be held on Sunday (today). She has benefited from being, in effect, the prime minister of the immensely popular President Luiz Inacio Lula da Silva, the former union leader. But, with a record of determination and success (which includes appearing to have conquered lymphatic cancer), this wife, mother and grandmother will be her own woman.

Brazil has a population of 200 million, is enjoying prosperity thanks to vast natural resources and wise political leadership. Brazil’s growth rate rivals China’s. The Govt has ensured  social justice meaning that the poor have been helped to move up.

My Notes: This news has a lot to do with trading. First, it opens our minds to a world beyond trading calls. Then, the news of a woman taking this high position takes the world to a more equal society – equal respect for men and women. To take this further, for men, when our mind is prepared to accept leadership by women, we become ready to accept change. We can adapt from a bearish stance to a bullish stance without much difficulty or vice versa. This means we can accept change without resisting it.

Off Topic: We Indians are filled with self praise. But, All emerging markets are doing well. Many of the countries are actually performing better than us (in terms of growth and social justice indicators) . Yet, our TV is filled with ‘India growth stories’ without comparing us to others, without checking if this growth is benefiting the 1.2 billion people.