Patience pays off

This morning gave us a brilliant example of why patience pays off when you are trading stocks. SPY provided a gap fading opportunity from the opening bell.

I've found it important to avoid hesitation lately when the market opens higher or lower from the day before because the price often seeks equilibrium quite quickly and traders who hem and haw over their entry decisions are often left in the dust. So it doesn't pay to be patient when entering a gap fade trade.

What does pay is waiting a bit to see where the trade goes once the gap is filled. In today's example, the gap was filled within pennies within 10 minutes. However, if you were to hold on for the next 15 minutes you could have doubled your money by holding on through the gap and taking part in that large red candle down.

The nice thing about this trade is you could have easily moved your stop loss to break even when the gap was almost filled. Even though price retraced a bit, it never really threatened the opening price and you would have had a no-risk trade that went on to double what you were willing to risk on the trade.