Ideally, traders who use this strategy will have secured their profits and closed their positions within an hour of the market open. You would spend the pre-market using your gap scanner to identify possible trade setups and then enter your positions at market open or slightly after the market opens. Trading gaps in the morning is popular among those who do not trade full-time and have other professional commitments as it only requires that you be available during the pre-market and market open hours. What is high volume on one stock may not necessarily be considered high volume for another.Įnsure that volume is higher than usual for the specific stock that you are trading. Remember that volume, like most of aspects of trading in the financial markets, is relative. Any meaningful move in a stocks price will require significant volume to achieve. The most important indicator to monitor when determining if a stock is going to gap up will be its volume. Whilst there is no concrete definition of what exactly constitutes a low float, anything under 20 million shares in the float should suffice. Stocks with low float have a limited supply of shares available on the markets and so they are fantastic candidates for potential gap ups as they are more likely to experience significant volatility. You can use sites like to keep up with the latest news and research potential trade candidates.Īnother characteristic in assessing whether a stock will gap up is the current float of the stock. The opposite is also true for a successful gap down, a negative catalyst will be required. Individual stocks can be highly unpredictable in the short term and knowing if a stock will gap up can be tricky.ĭespite the unknowable nature of stocks, there is a range of factors that you can look for to gauge the probability of whether or not a stock will gap up.Ī positive catalyst is essential for a successful gap up, so you will be looking for stocks that have had some positive news that might support a gap up in the stock. Once you have your parameters set up, sort the gap scanner by top % gainer to see the highest gapping stocks each morning in premarket and then begin looking the charts of those stocks to determine which has the best pattern, volume, and catalyst for a potential move higher in the morning. Stocks that have an Average True Range (ATR) of at least 50 cents.Average daily volume over 500,000 shares.At least 100,000 shares traded by 9 AM.Since your gap scanner is only as useful as the parameters within which it operates, here are some suggestions for your gap scanning criteria. Once you have decided on a scanner, you will need to define the parameters within which it operates. We have provided some examples above to choose from, or you may decide on a different scanning solution that better suits your specific needs and preferences. The first step in setting up your gap scanner will be to decide on which scanner is best for you to use. You can see in the image below BLIN gapped up from $8.50 to about $14.00 per share on July 6th, 2021 and it gapped down from its close on July 6th at $12.21 to $10.00 the following day.īLIN Gap Down Example How to set up a Gap Scanner? In the example below, you will see stock ticker ATER gapping up and opening higher than its previous days trading session.ĪTER closed at $11.84 on and gapped up to (opened at) $11.84 the following day.Ī gap down in stocks is formed in a similar fashion as a gap up except that the opening price of the following day’s regular cash session is lower than the previous closing price. This difference in price creates a “gap” in the price levels of a stock. A gap up in stocks is formed when the opening price of the following day’s regular cash session is greater than the closing price of the previous day’s session.
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