How I Trade Stocks For a Living -- [Chapter 3]

CHAPTER 3:  MICHAEL PARNESS
 
Michael Parness (Aka "Waxie") is a daytrader whom I first learn the concept
of "Fading The Gap" from.  Michael is a really nice rags to riches story where
he was able to turn $30,000 into millions at the height of the Internet
bubble.  Since I participate in the market full-time, Fading the morning Gap
is a technique I use everyday to make money.  Even if you don't trade the
market full-time, I think it is worth it to familiarize yourself with this
technique.  For those who are not full-time traders, you can make a couple
of day trades using this technique before you go to work in the morning. 
Incidentally, for myself, this is another trading technique that I plug into The
Beanieville System. 
 
Do you notice that in the majority of times when a stock gaps higher before
the opening bell that it tends to come in to "fill the gap" after the bell?  Why
it gaps higher could be good news specific to the stock or the general
market, and traders (or amateurs) buy the stock premarket in the morning
or after hours the day before.  This "excitement" tends to get faded at least
 
temporarily by either profit taking or shorting by traders after the opening
bell.  You can make some quick cash from a quick trade if you understand
the dynamics of this phenomenon.
 
Likewise, when a stock gaps down before the open, it tends to go higher to
"fill the gap" when the market opens.  Why it gaps lower could be bad news
specific to the stock or the general market, and traders (or amateurs) sell
the stock premarket in the morning or after hours the day before.  This
"fear" tends to get faded at least temporarily by traders buying after (or
sometimes before) the opening bell.  Again, you can make some quick cash
from a quick trade if you understand the dynamics of this phenomenon.
 
I feel that learning to Fade The Gap is very important if you ever want to
become a daytrader.  Even if daytrading is not your thing, a basic
understanding of the Fading The Gap phenomenon can help you with the
entry points of your trades.  To learn more about Fading The Gap, I recommend reading one of Parness' books, like ​Rule The Freakin' Markets

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