Now that the contest is over let’s talk about trading again. After getting my new laptop this week I decided to try THINKORSWIM’s trading platform. I’ve heard many good things about them but I had to try it out for myself. It’s not bad I must say, the charts are fantastic and best of all it’s all free. I’ll be using one of their charts in this article to demonstrate the 30-minute gap strategy but first let’s take a look at the broad markets.

As you can see, the S&P500 is still very weak. Nothing has changed since we last looked at the index on June 8, 2008. I included June 8, 2008’s marked chart just in case you missed that post. We have yet to reach the 1280 level, but we should by next month. We just broke below the “next level”/1325 level, so testing March’s lows in the coming month would not surprise me.

So as you can see, I’ve been bearish for the past month and still am. All my long trades have been day-trades and my large positions are in shorts. 70% of my portfolio is in QID and TWM. All the major indices have shown signs of weakness in the past month, but if you haven’t profited from this yet, it’s still not too late. In the second part of this article I will show you the power of the 30-minute gap strategy and how you can make some quick profits.

Attached is a 1-minute day chart of TWM on Friday 20, 2008 from THINKORSWIM. TWM is an ultrashort of the Russell 2000 index, so if this index performs poorly, TWM will do great. The markings illustrate the gap strategy…but what is it and how does it work? The 30-minute gap strategy is a guide on how you should trade a gap up while minimizing your risk. This day-trading strategy starts with a morning gap-up. After the first 30-minutes of trading scan the chart and draw in a line to mark the 30-minute high and 30-minute low. Note that I have 7:30 and 8:00 circled on the chart, that is 9:30 and 10:00 on Wallstreet, I`ve adjusted the settings to my time zone. Once the stock trades above the 30-minute high with good volume, buy/fill your position and place a stop loss at the 30-minute low. This higher high may trigger right at 30-minutes or 15 minutes later, how soon it triggers is irrelevant. After filling your position let the stock ride, momentum should push it higher but keep adjusting your stop loss to secure your profits. You never want a winning trade to turn into a losing trade. Many investors often turn day-trades into long-term trades because of that mistake. A long-term trade in this environment can only lead to greater losses.

Richard
richard[at]hedgeagainstspeculation.com