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Dear PA Traders,
I have one questions with respect to traditional gaps. Al mentions that gap indicates strength. I interpret the word "strength" as continuation of prior trend or possible reversal based on overall context. What I have observed in Banknifty futures since few days is session begins with gap-up or gap-down but during the session, market tends to close these gaps. Is there is any way to interpret this behavior (daily/consecutive gap-ups and gap-downs at the start of session) as per PA principles.
Please see screen-shot for Banknifty futures on 15 mins TF for your reference.
Cheers!
Amol
If the market's showing strength at some point and then nullifying it with price action that follows, it is essentially disappointment. If both sides in a market is disappointed by follow through price action, thereby creating confusion - the market is essentially in a trading range. Since, 80% breakout attempts fail in a trading range, traders fade any breakout attempts above or below and buy low sell high and scalp(BLSHS).
Since, this TR is a pretty large one(TR on a higher TF), one can expect this TR to enter BO mode after 20 or so bars(again on a higher TF) and the following move up or down is expected to be big enough(my personal assessment).
https://www.brookstradingcourse.com/trade-price-action/video-48f-trading-the-open/
I just took this class, I believe it will be helpful. As Al says the market has inertia, so if you are in TR do not expect any change until it does bcz clearly this chart is in a pretty tight TR.
Gap up and gap down is considered strong only when it breaks above or below the important level, example, double top/bottom etc. In trading world traders believe that gaps will fill, In normal circumstances gaps usually fills in the first hour or last hour.
I hope this answer helps,
Happy trading.
