Trading software

Wednesday, November 23, 2011

Course in trading, S&P 500 gap trade, Lingfield racing

Finished the diploma in Financial Trading last night and I found the course excellent. I learned tonnes and am looking forward to putting it into action and hopefully earning a few bob. I also have access to their trading days in their office on the 3rd Friday of the month which I’m looking forward to. Basically, you bring in the laptop and trade with the tutors for the day – they are on hand for mentoring and advice. Can’t go this week but I may try make the December one. 

The next step with my financial trading is to go through all my notes and come up with a proper trading plan. I’ve been doing OK at it but it’s been quite hap-hazard which isn’t ideal. There’s no point in jumping on the laptop whenever I can and trying something out – I need a timetable and must decide when I’m going to trade. I need to know what I’m going to specialise on and what style of trades suit my personality.  For now, daytrading isn’t really an option but I do have the two hour timeslot from 6.30am to 8.30 to place a few strategic trades, plus some time at the weekends to look at longer term positions. I may concentrate on that timeslot for the next month or two and see how it works out – although it does mean getting up early each day. Still, I’ve never been afraid of a bit of graft so I don’t think it will be any bother. 


One of the topics on the course was the S&P gap trade and I have an open position on that today. I’m not giving any secrets away when I explain how it works – it’s one of the most widely known trades out there and as such, it has certain self-fulfilling qualities. 

Basically, you check what price the S&P closed at the night before (around 9pm Irish time). At this point, the Asian markets take over while the Europeans go to bed. In the morning (6.30 to 8.30), you check if the S&P futures has dropped from that closing price overnight. If so, you buy it and wait on the gap to close to the previous night’s close. It can be quiet for a while but when the Americans come in, they usually close the gap as most Americans still prefer to buy rather than selling - and don’t like to see us pesky Europeans and Asians shorting their stock.  If the gap hasn’t closed by around 3pm, you get out as by that stage, the ‘real’ market is in full swing. 

To see an example, look at the chart below.

Last night, the S&P closed around 1188 (I’ve drawn a black horizontal line at that price). I’m basically hoping the price rises back up to this price. You can see in the night/early morning trade, the price went lower and dropped to around 1169 at one point. 

When I got up at 6am, the price was around 1172 which was a fair gap from 1188 so I bought in anticipation of the gap closing before 3pm today. As I type, it’s slightly up on that and I’m hoping the gap will close up to the black line when the Americans arrive at their desk. 

As mentioned, because it’s one of the most famous trades out there, it kinda becomes a self-fulfilling prophecy as people buy in anticipation of the gap close and thus push up the price. Of course, it doesn’t always work and a news item could destroy the trade so proper stop-losses should always be in place. I’m heading out now but I hope that the gap has closed by the time I check back around 3pm. If so, the profit will be in my account and that’ s a good job done. 


One the racing front, I’ve no huge fancies today although I do think Princess Lexi is worth a punt in the 3.45 Lingfield. She’s off a lower mark here on the all-weather and she ran well for the new yard last time. 3/1 on the machine looks a fair price. 

Best of luck with your trading/betting or whatever it is you get upto today!

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