Day trading morning gaps
Day trading strategies for WSDT Nov 01, 2019
Day trading morning gaps is one of the most common strategies used by many day traders. It is utilized by many day traders to reap good profits. It is fundamentally based on the results of the successive trading activities that happened overnight spanning from new events to earnings and certain economic reports.
As we explained in our previous article about gap and go trading strategy, gaps are created when the current opening prices move higher than the previous day closing price.
Day trading morning gaps thrives on indicated the high volatility and higher liquidity rate stock.
How is day trading morning gaps done?
The morning gap strategy is subdivided into two:
- Full/pullback gap
- Gap fill
Full gap
A full gap in morning gap trading occurs when the price doesn’t go above its previous day’s close. A full can also occur when we find the open price of the stock outside the price range of the previous.
However a gap higher is when the open price is more than that of the previous day, and we have a full gap lower when the open price is less or below the low of the previous day.
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Gap fill
We have a gap fill when a gap is created at the opening but during the trading day, it overlaps the close of the previous day at a point. Most gaps don’t get filled at some specific times of the day.
It is important to note that, if stock gaps extremely, it can relatively take a long time before the gaps are filled, a couple of days or even weeks. In morning gap trading, this is called breakaway gaps
Different techniques in day trading morning gaps
The First Candlestick
You can determine how weak or strong a stock is by the initial 5-minute bar. Many day trading morning gaps beginners, usually buy at the break out at this point or make a call during the few opening minutes at the open. This technique in the morning gap trading strategy is like walking on thin ice. It can fail you at any point because the market doesn’t always conform to what we think it should.
It is advisable to always lay on the wait, keep your target and go in when the market settles. You can decide to go in by getting the first candlestick after the gap. This opens up another task on where to place the stop, at this point, you may put it below the low of the candlestick and that works sometimes.
Clean Сandlesticks
This one of the most frequently used morning gap trading techniques. When the stock gaps up, you might wait to see the consolidation near the high of the stock. You should see this consolidation within four to eight bars.
In this morning gap trading technique, important to check that the stock doesn’t go back much on the gap up the candlestick. You might also want to watch the stock if it keeps its position above the 10-period exponential moving average, this will indicate that the stock is still moving at a good and fast pace. The clean candlestick is the way to go!
You can then wait for the stock to go for the high of the day, not less than half past 10 in the morning.
Make a move after the gap fills
This morning gap trading strategy dwells on the fundamentals of stocks filling the gap after pulling back to its prior days close. You would have to monitor to see some levels of strength, then you go in for that position. You can then go ahead and place a stop below the candlestick.
The challenging part of day trading morning gaps might be the price target because the pullbacks are often higher than the high or low of the morning by a wide interval. Most experts in the morning gap trading go for the kill by buying the pullback and reselling the high of the morning.
Is day trading morning gaps a popular strategy?
Day trading morning gaps is a good and fun-to-use strategy, but it requires some good analytical eyes to complement it.
Morning gap trading is very common amongst many day traders. Basically day traders who use morning gap trading strategies strongly draw their analysis and gains from volatility caused by price movements as well as the liquidity of the stock.
Higher liquidity and high volatility is a good catch for morning gap day trading.
Another reason why morning gap trading is quite popular because certain financial news, earnings, and reports have an effect on it, which makes it a good choice for traders who want to go that way of trading.
Is day trading morning gaps a good strategy for WSDT?
A number of mentors in the WSDT used the morning gap trading strategy. This choice was based on various reasons, the prime of them was, it had a good analytical picture of which stocks were going hard in terms of price movement and which ones were falling. It gave them a whole picture of which stocks would make profits in specific trading seasons.
Moreover, morning gap trading is seen by most of the mentors as a good fit for quick earning considering the brisk nature of the competition.
Jeremy Newsome made more solid remarks on this point by saying:
Final thoughts
Morning gap trading is a decent earner with a strong analytical base. If you have good eyes for the charts and predict market movements well, then this would be one of the best picks for you.
However, you must also understand that day trading morning gaps need some waves or buzz on the market to thrive because this affects price movements which in turn creates gaps.
