Archive for October, 2015

Gap Trading In Stocks

Posted: October 28, 2015 in Uncategorized

Gap trading is a very popular term among traders and many professional traders use gap trading for swift profits. It has gained popularity in the markets solely because of the fact that plenty of gaps are created on charts and when identified and traded correctly they bring quick profits.

But what exactly is a gap?

In simple terms, a gap is that area on the chart where no trade has occurred. In other words, there is a big difference between the price of the previous day’s close and the next day’s open. This is caused by a sudden interest that has developed in the instrument after the price closed for the day. This could be any positive or negative news related to that instrument causing the masses to place buy or sell orders after market hours.

Hence, when the market opens, the price zooms up causing a gap on the upside or it falls down drastically causing a gap on the downside.

Besides the opening gap there are three other kind of gaps:

  1. Runaway gaps
  2. Breakaway gaps
  3. Exhaustion gaps

Runaway gaps usually occur in a strong trend and are considered bullish in an uptrend and bearish in a downtrend.

Breakaway gaps usually occur after long periods of consolidation and could result in a continuation of the trend or show strong reversal.

Exhaustion gaps usually occur at the end of an existing trend as a sign that the same is about to end.

A gap may occur naturally or may be created by professionals. News about a particular instrument may cause a gap to occur naturally due to the excited buying and selling sentiments of the investors. However professional buying is done to create gaps only to trap the novice and amateur traders.

Trading gaps requires a special skill set to identify and differentiate between a natural gap and a professional gap. It should only be attempted by traders after attaining a thorough understanding of the same.

Gap trading can however be extremely fruitful and result in very quick gains as a gap trader more often than not trades ahead of the crowd.

Copyright  Pathfinders Training / 9022330009

There are two kinds of income – Active income and Passive income.

Active income is the income you get by spending your time & skill, like your salary, consultancy or business income.

Passive income is the income that you get without spending your time like rental income, interest and dividends.

To become financially free your passive income should be greater than your active income.

There are four equations of money:

  1. Income + Loan = Expense
  2. Income = Expense
  3. Income – Expense = Saving
  4. Income – Saving = Expense

The fourth equation leads you to #financial freedom if you live your life by it, as your regular savings will increase your passive #income. Ask yourself in what equation you are currently in and what is your plan to achieve financial freedom.

The four financial needs are:

  1. Safety
  2. Security
  3. Liquidity
  4. Growth

Safety comes from having your own house. Please remember your first house is your security and your second house is your investment.

Security comes from adequate insurance so that your family would be taken care of in case you are not there.

Liquidity is enough cash saving for at least six months in case you lose your job, business, or consultancy.

Growth is the need to make your money grow much faster than inflation, as inflation eats away a part of it regularly. If your money is growing at 10% and inflation is at 8%, the effective growth of your money is 2% only. The effective rate of growth should be around 20% for which equity and real estate are good places to #invest in.

Copyright: Pathfinders Trainings / 9022330009