Day trading and gaps

[diliff]

This is just an observation I've made (and it may or may not be accurate)..

It seems like the Australian market (ASX) seems to open with large gaps more often than most other markets, namely the US (nasdaq, nyse etc) which, along with the higher commissions charged by Aus brokers, seems to make profitable day trading a bit harder on the ASX. Obviously it can still be done, and gaps sometimes reverse and close, but when they don't, the a large proportion of the daily movement happens after hours without the ability to day trade them.

Is this the case in your opinion? If so, is it because the Aus markets are more fundamentally affected by overseas news than, for example, the American market is affected by us?

 

[Trembling Hand]

but when they don't, the a large proportion of the daily movement happens after hours without the ability to day trade them.

Is this the case in your opinion? If so, is it because the Aus markets are more fundamentally affected by overseas news than, for example, the American market is affected by us?

The ASX market doesn't Gap any more or less than other markets. Do a simple back test in excel with EOD data and you will see this as yet another market 'truism' that doesn't hold.

The US is just as prone to gapping from markets open before them and premarket news as our Market. The statement I underlined is simply not true.

 

[diliff]

The ASX market doesn't Gap any more or less than other markets. Do a simple back test in excel with EOD data and you will see this as yet another market 'truism' that doesn't hold.

The US is just as prone to gapping from markets open before them and premarket news as our Market. The statement I underlined is simply not true.

Fair enough, thats exactly what I was seeking to find out. It was very much based on my intuition alone.

Purely based on the fact that our market is quite small compared to the Euro or US markets though, I'm surprised that we aren't influenced by them more than they are by us though. But then again, I suppose gaps are more based on the percentage movements and market sentiment out of trading hours than the size of the markets themselves.

 

[juw177]

The US markets have pre-market trading so that by the time the market opens, you have an idea of the price range and volatility in early session.

That makes it easier to trade openings than ASX.

 

[diliff]

I asked this question a while ago and accepted the answers.. but when I looked at the last 5 days on Google Finance and compared the All Ords to the Dow Jones, I saw a very interesting thing... the All Ords DID GAP FAR MORE than the Dow Jones. Furthermore, it had far greater daily movements too. I know this is not a wide scale backtest (I don't have the facilities to check) as it only spans 5 days, but it does illustrate what I previously noticed but could not quantify.

In the example below, the Dow Jones seemed to CREATE the gaps that the All Ords dutifully followed when the markets opened in Aus. Obviously this couldn't be strictly true, as Aus is ahead of the US in terms of market opening, I suppose, but it does seem to look that way.