Customized Programs

What does this mean? This means that if the market turns around and goes back up through the low of the previous day by two ticks, your buy stop will be elected and you will be long the market. See Figure 6-3 for an illustration of this condition.

In this intance the gap signal went long may cocoa as shaun and closed out the long position at the end of the day. The rationale for this trade, both operationally and psychologically, is fairly understandable. If the market opens down price gap, the majority of traders interpret this to be a bearish sign, expecting prices to go lower. This brings in more selling. The market moves lower.

If selling begins to "dry up" (that is, if the selling pressure decreases), then prices will not drop any further. If the market is strong enough to then rally back up through the low of the previous day, many traders will interpret this as a bullish indication and a negation of the lower opening price gap.

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