Trading the Overnight Gap

Do not hold a stock past the open the next day.

Sell either at the open or just prior to the opening bell, because most of the time, the stock will gap up, then immediately selloff, then bounce at the first bottom. Sometimes the stock gaps up, climbs up initially then sells off.

It is not worth the risk associated with trying to catch the top of the temporary spike up before it sells off.

Many times the stock gaps and sells off immediately at the bell.

Trading methods center around one concept: capital preservation.

Selling at the open is the insurance policy; it reduces risk and increases percentages over time. It lets a few winners go, but more importantly it doesn't ride the losers down.

• The news is not really that bad (but still causes an overreaction).

• The stock ends up near the bottom of the pattern (near the low of the day).

• There should be no more than 50% selling in the last five minutes.