Interactive Brokers (IB) is a popular broker, operating in several counties around the world, usually under local national names. Their trading platform is the same everywhere, it's the Trader Workstation or TWS. For novice users, it may be somewhat intimidating at first glance, but once you get a good understanding, you'll see it has a lot of powerful features to offer.
We have learned that disciplined trading is the only way to survive in this business. The best way to adhere to your own strict trading rules is to automate things. Let your orders take care of your trading, not your brain because the human brain usually fails in (short-term) trading. In order to achieve this, we need an extensive set of order types. TWS has just that, so let's get into it.
In our previous post about gaps, we looked at market behavior around opening-gaps and would generally happen during that same trading session. But nothing spectacular came out, an opening-gap basically meant nothing for further price action that day. Also, the average size of an opening-gap turned out to be a few factors smaller than average daily volatility, so those margins were easily absorbed regardless of whether there was an opening gap or not.
Now suppose the opening-gap does not get closed during the same trading day. How does affect the market in the next couple of days? Does price gravitate back towards such a gap, as if it wants to pull in price or doesn't it have any significant meaning as we saw in the opening-gaps analysis? Let's dive in.
There's a lot of talk about so-called gaps. General wisdom says they will be closed. But is that true? Is there a statistical edge about gaps that we can use in our trading? Let's find out.
The trading world is known for its beautiful one-liners that are all so true, but at the same time so extremely difficult to practice. Some of the most well known around are: "Cut your losses and let your profits run." or "The trend is your friend." (until it isn't), just to mention a few. Collecting more of those one-liners would be a great subject for another article. This post deals with getting with the trend.