Sometimes we say trading is a game of numbers; gambling is another
word used for trading. People who make profits or losses conclude their experience
as a matter of fate. But do we really
think that there is a hidden meaning in every number appearing on your trading
terminal!
If we go through the spiritual truths and their related
literature we can learn that their lies an outer world to which we can
communicate, but what lies between the outer world and our present body world
is the interesting thing. It is a GAP. There are various levels of this GAP,
which acts as resistance and support to your evolution process, once you start
enlighten your soul you are able to break the resistance and enter into the
next GAP level. This is how our soul evolves.
What if I tell you that the million years accepted truths
can also be applied to financial markets prevailing all over the world. There
are GAPs that exist in the price section of the security. As per technical
school of thoughts Gaps are the areas where no trading takes place,as found by
Dynamic Levels, I must tell you these new innovative technical gaps are the
levels where whole lot of trading takes place and they acts as better
resistance and support levels for prices . Like our soul, the market evolves by
breaking and resisting on different levels of these gaps.
How to identify these gaps?
Like average true range (ATR) in technical analysis there is
a new concept that is ADM, Average Daily Movement. It is high subtracted by low
of daily movement of the market, this value is averaged for the last 250
trading days, the resulting value is ADM. Suppose we are looking at the chart
of a security irrespective of time frame i.e. daily, weekly, monthly (no
intraday time frames as ADM is calculated on High-Lows of daily levels), if
there exist a difference of more than one ADM between two lows or two highs of
two different candles; we say there lies a Technical Gap.
How to use these gaps?
Gaps provide important support and resistance level. If we
are analyzing an uptrend in the market and there lies a gap in the lower side,
this gap acts as a good support level. We can execute a buy entry at that
level. Same is the case when we analyze downtrend and finds a good gap level in
the upper side, this gap level acts as a good resistance and their we can
execute a short sell position or book our profits. When these resistance and
support levels break, we call it breakout. Generally successful breakout
happens 2 times out of 10 times of occurrence of breakout, rest 8 are false
breakouts.
Gaps and their relevance with Time frames:
Gaps exist at daily, weekly and monthly time frames. As time
frame increases the strength credibility of gap level increases. It is because
weekly gap means price has already tested itself for the period of five trading
days, and monthly gap means price has tested itself for the 21-23 trading days
over that month. It means noises arising in market due to occurrence of news;
events etc are already discounted over the time period.
For more clarification and any query contact me on:
Jainarpit.upes@gmail.com
