When a market is actually closed before the open then there is the chance to look for a gap and the potential for that gap to close.

This gives us a trading opportunity.

In the era of 24 hour electronic markets, this isn’t going to work with all products.

However if your market is closed then keep an eye out for a gap.

Here’s a couple of quick tips:

If the market drifts on very little news then look for a test of the “gap level.”

If you’re headed in the direction of the gap – there’s a very high probability of a test of the level.

If the gap level is just outside the recent high or low – look for a break of the high or low and a test of the gap.

Gaps don’t always happen and they don’t always work.

Just keep this one up your sleeve in your trading toolbox.

Good Trading

You might know it as the depth of market, the DOM, the order flow, the order book, the tape, or just the book – but it’s all the same thing.

The DOM is just a way of showing all the buyers and sellers and their respective limit orders ready to be executed.

The buyers (the bids) are on the left hand side and the sellers (the offers) are on the right.

The way I remember it is buy low, sell high.

The idea of trading with the DOM is also a relatively simple one.

If there are a lot of buyers and not many sellers – logic would suggest that prices will then rise.
Conversely if there’s a lot of sellers and no buyers then price must fall.

Basic supply and demand.

However when new traders first take a look at a DOM, it’s quite confusing and many can get a bit overwhelmed.

One of the best things about charts is their simplicity – however by nature they are a representation of things that happened in the past.

And of course we’re interested in what will happen in the future.

So when we use the DOM to trade we are basically looking for places where there are more buyers than sellers or more sellers than buyers.

The simple way to do this is just look for a bid (in the case of buying) or an offer (in the case of selling) that stays there and can’t get taken out.

Sometimes it can be as simple as there being a large buy order (bid) sitting right there for all to see, however that doesn’t happen so much these days as people have wised up to it.
So you need to look a bit deeper.

For instance if price continues to trade at 5493 – where there are many market orders getting executing at the bid – but the bid keeps on refreshing – then you know there is a buyer there.
It’s really as simple as that.

However it does take a while for your eyes to get used to spotting all the buying and selling.

Practice for a couple of days and in no time you’ll be able to see all the price movements right down to the tick and then you’ll really be able to trade like the pros.

 

Good Trading.