CFA Courses

If the market is not below the opening price, you will enter a sell stop order two ticks below the then-current low of the day in order to get you short. In addition, you may retain your original gap-sell-stop two ticks below the high of the previous day in the event that the market begins to move strongly down, thereby giving you two units on the short side.

The 1-hour delay gap sell signal. As you can see, the one hour gap signal is a technique which allows quicker entry in the event of potentially large moves on the opening, which could limit the potential profit from a delayed buy gap or a delayed sell gap.

The best time to use this approach is of course in markets which have opened on significantly large gaps down or up from the previous day's low. Finally, remember, that the DGO requires waiting one hour. I have not experimented with different time delays.

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