How to Trade Gap up and Gap down Market

You probably get confused when the market opens gap up & gap down, so today I am going to share some strategies to trade gap-up and gap-down markets,

Before going to the main topic, let's understand why these gap up & gap down happen.

Why do gap up and gap down happen?

These things mainly occur if there is news in the market, people have their overnight positions, global sentiment, and various factors.

There is a different case that I'm going to discuss in today's topic,

Gap Up Opening

Trading in a gap-up market depends upon the market sentiment, and if marketing opens a gap-up, also breaking the high, which means it can give you a good target, as I have mentioned in this chart pattern, but make sure you have added proper stop losses because every strategy has 50% to 60% winning rate.

As you can see, the market has created a W pattern, but the only thing to remember is if the markets open more than 150 to 600 points. After that, in most cases, it goes sideways, and also it depends upon whether you are trading on the stocks or indexes, especially, I'm talking about index-based options trading, and what we can do is we will take a trade according to the price actions.

Sometimes gap-down takes away all of the market movement and then goes sideways, but it does not happen as usual. One thing that keeps in your mind is if it's consolidated and then it gives a breakout, which means it can be sustainable.

Gap Down Opening

In the gap-down opening, it depends on the opening prices, and as you can see in this chart, it opened up in the lower part where it had tested multiple times, then it got selling pressure,

It happens because the people, who have bought at the top, will exit their position, and it will let the market down. But as I stated, if it's opening more than 150 - 600 points, we will trade according to the price action.

The possibility is endless. In case it opened up in the mid, then most probably, it gets stuck in there.

Conclusion:-

This is per my analysis because everyone has different viewpoints and perspectives about the market, and it may not fit your need, so further research needs to be required.