Summary

Other factors are to be considered in placing orders, some of which have been mentioned previously:

•  Use market orders carefully.

•  Avoid market orders in thinly traded markets.

•  Remember to cancel orders when needed.

•  Know which orders are accepted by the exchange.

•  Have a backup system in the event that your electronic order-
entry method fails.

•  Evaluate bids and offers and use limit orders for position
trading.

•  Use market orders for day trading unless your system or
method dictates otherwise.

•  Monitor SSFs for trading volume in order to evaluate the po­
tential use of market orders.

•  Check with your broker or brokerage house if you are unclear
about which orders you can or cannot use.

•  When placing spread orders, be especially careful to enter the
correct buy or sell order on the SSFs you want to trade as a
spread.

Advanced Technical Methods for SSFs

Although many trading systems and methods can be used for trading in SSFs, some clearly work better than others. This chapter provides an overview of indicators and methods that I have found particularly useful in the futures markets. In reviewing these indicators, you should bear in mind that systems and methods used for trading stocks are not necessarily effective or applicable to futures given the more volatile nature of the futures market, which, as you know, is a function of its lower margin.

I The Gap Trade

The opening gap trade is a short-term trade that can be used effectively by day traders. The logic and rules of its application are not only simple but logical and sensible as well. The efficacy of the gap trade is based on trader psychology. The tendency of a stock or SSF contract to open below the previous day's session low or above the previous day's session high is a function of news that, in turn, prompts traders and investors to sell or buy aggressively. Hence,

bearish news can cause an SSF market to open below the previous day's session low, whereas bullish news can cause an SSF market to open above the previous day's session high. Of course, the tendency of an SSF to act this way is a function of the behavior of the underlying stock.

As examples of gap higher and gap lower openings, examine Figures 11.1 and 11.2.

stock broker ~ forex trading strategy
stock picks ~ online trading
stock market news ~ stock trading
stock exchange ~ stock photos