Gap Trading Setups

Gap trading is a simple and disciplined approach to buying and shorting stocks that have a price gap from the previous close on a news catalyst. In my trading I focus on gaps with relatively high pre-market volume from the institutional players that are selling and buying these stocks before the market opens.

There are several gap trading setups that I utilize in my day trading (I call them my A+ setups). They include the following:

  • Gap & Go Setup
  • Gap & Reversal Setup
  • Gap & Continuation Setup

Trading rules that help me execute my gap trading A+ setups:

  • When there is no A+ set up, I wait. When it comes, I trade.
  • As soon as I enter into a trade, I set my stop loss (not every trade is a winner)
  • I place my stop losses outside the range of noise so I am only stopped out when my setup fails
  • I never set targets – I let my winners run. However, I always adjust my take profit levels
  • I scale into trades. Gap trading is very volatile in the opening minutes, hence I risk only a relatively small position. When the trades goes in my favor, I add.
  • As my position starts to make profits, I constantly adjust my stop limit orders (e.g., take profit levels)

GAP AND GO EXAMPLES

TSLA

TWTR

AA

TSLA

FDX

M

YNDX

KRTX

SDC

BIDU

EXPE

PLT

ROKU

WDAY

GRUB

X

LOCO

QRVO

GAP AND REVERSAL EXAMPLES

ROKU

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CLVS

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JD

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GOOS

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MTCH

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AMRN

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AMZN

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NFLX

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FB

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BIIB

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CRON

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GAP AND CONTINUATION EXAMPLES

RAD

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LK

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SHAK

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TSLA

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AAL

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CRUS

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AAPL

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LITE

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