Interview with Scott Andrews - Better System Trader

Scott Andrews is the CEO and Co-Founder of InvestiQuant, an innovative financial services company providing quantitative research, tools, and services to active investors and traders around the globe.

Scott has been trading full time since 2004, finding great success trading the opening gap and launching MasterTheGap.com in 2008. Scott has published over 1,500 daily gap analysis videos and his exact gap trading plan prior to the market open each morning for his subscribers. Scott is highly respected for his comprehensive analysis and is affectionately known by professional and retails traders around the world as “The Gap Guy.”

Scott’s quantitative research and analysis has been published in most industry leading journals and sites including Futures Magazine, Active Trader, SFO, Trader Magazine, Trader Planet, Traders Library, INO, and many more. Scott has also been a popular speaker at many World Money Shows and Traders Expos and numerous traders’ meet-up and investing groups.

In this weeks episode Scott shares his expertise in gaps, explaining what factors to take into account when trading gaps and what to avoid. We also discuss gap zones, when to fade and when to follow and calculating stops and targets.

PLUS, for those that aren’t into Gap trading, we cover some important concepts that can impact all styles of trading, include one concept called ‘Ensemble Systems’ which may just change the way you look at trading strategies.

Stop trying to guess which gaps will work and study them

Click To Tweet

Topics discussed

Why it’s important to trade a style that matches your own strengths rather than follow someone else
Why gap trading works
Markets where gaps work best and those that don’t
The best type of stocks to trades gaps and the stocks to avoid
The benefits of trading gaps in indices vs stocks
The 3 market conditions to look at when analysing a gap
How seasonality impacts gap trading
Signs of gaps to avoid
Using ATR to determine the probability of gap size closing
Gap zones and how the location of the gap can provide useful information
The worst performing gap zone
The psychology of certain gap zones and why some work better than others
When to fade the gap and when to follow it
Calculating stop and profit levels based on gap characteristics and market conditions
How to determine if a target should be a full gap close, partial gap close or an extended target past gap close
The impact of QE on gaps
How to combine systems into Ensemble Systems for an interesting view on trading strategies

Resources & Links mentioned in this episode

Scott can be contacted through his website InvestiQuant.com, by email or follow @investiquant on Twitter
Books:

FREE Whitepaper – Beyond Hypothetical: How Quantified Strategies & Diversification Can Benefit Traders

Video: Scott Andrews of Master the Gap

Quotes

Historically, fading larger gaps has had lower probabilities

Click To Tweet

Stops are tuned for each Gap Zone and market condition

Click To Tweet

Diversify into other markets to smooth the equity curve

Click To Tweet

Trade slowly until you really learn what you don’t know

Click To Tweet

Don’t try to engineer losses out of your system, it will cost you way more money in the end

Click To Tweet

One of the keys to my early success was I understood my weaknesses

Click To Tweet

Top tips from this episode

Here are some of my favourite tips from Scott this episode:

There are many different ways to trade gaps successfully – from the size of the gap to the location of the gap, which Scott calls ‘gap zones’. You also need to take into account market conditions, recent price action, seasonality, stops and targets and other factors. There really is a lot to it, so if you’re going to trade gaps you better study up on them or follow someone who already has. Also, if you trade a system that enters on the open you may want to consider the effect of opening gaps on your entries.
Ensemble systems – the idea of ensemble systems is really interesting. It’s not a new idea, it’s used in weather prediction but the applications to trading could be very interesting. I think we might need to hear more about it in the future!