Regulatory & Firm Element

In using the gap open lower and higher system for T-bond futures, I do not include the night session trading range. I am simply using the open, high, low, and close of the day session. You may want to use the system differently than I do

However, if you do, then I suggest you do some research with it before implementing these changes. In this case, the gap higher opening establishes the first condition for a possible sell signal. A sell stop would be placed two ticks below the high of the previous day at 10212.

You would not be able to use a sellstop- limit because the Chicago Board of Trade, home of T-bond futures trading, does not accept stop limit orders. If the market starts to decline and falls two ticks below the previous day's high, you would be stopped in to your short position. Your initial stop loss would be either several ticks above the then-current high of the day, or a money management dollar stop loss as discussed previously.

The psychology for the gap higher open sell is essentially similar to that of the gap lower open buy, only in reverse. When the market opens on a gap higher, those who are short rush to cover their positions and those who wish to get long, thinking the market is strong, support the higher opening.

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