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Learn Island Reversal, Gaps with Charts to make Money from Stock Market

Posted By On 5/22/2009 01:51:00 PM Under , ,
1. An important technical term worth noting is island reversal and same needs to be understood to be able to make a quality trading decison.

2. Island reversal shows gaps between the signal day and the days on either side. This is a strong short-term signal. After an up-trend one will see that the day's low is above the High of the day before and the day after. One can understand that in case of an after a down-trend; the day's High is below the Low of the day before and the day after.

3. One can understand the gaps with the following explanation that Gaps occur when the lowest price traded is above the high of the previous day or, viceversa, when the highest price traded is below the previous day.

4. With these terminology of gap we should also learn a term which is filling of the gaps and same can be explained by stating that a gap is filled when the range of subsequent bars closes the gap. There are two basic rules for making money in the stock market and it is that one should avoid trading common gaps, and one should indulge in trading gaps only when these gaps are confirmed by volume.
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