This Gap Trading Strategy Prints You Money (Gap Up, Gap Down, Gap Fill)

Summary

This video tutorial teaches viewers how to trade price gaps effectively. It explains the concepts of gap up and gap down, the reasons behind gap fills, and how to identify them. The video emphasizes the importance of gap width and how it can signal overbought or oversold conditions. Strategies are discussed for combining price gaps with key levels and Bollinger Bands to identify high-quality trade setups, including examples of gap fills at support and resistance levels. The video also suggests using intraday trend confirmations to enter trades and directs viewers to WIS trade.com for premium guides.

Takeaways

• 📈 A 'gap up' occurs when the price opens higher than the previous day's close, while a 'gap down' is when it opens lower.
• 🔍 Gaps often happen due to news releases outside regular trading hours that cause significant price swings.
• 🔙 A 'gap fill' happens when the price returns to the pre-gap price level, indicating a reversal in the market trend.
• 📊 Gap fills are more likely when the gap was caused by irrational or emotional factors rather than fundamental ones.
• 📉 Wide gaps suggest a stock is overbought or oversold, which can lead to more drastic price reversals.
• 🏁 Combining price gaps with key levels can provide excellent trade setups, particularly when there's a clear trend change.
• 📋 False breakouts, where price gaps past a support or resistance zone but doesn't sustain, can lead to significant price moves in the opposite direction.
• 📈 Using Bollinger Bands in conjunction with gaps can confirm overbought or oversold conditions, enhancing trade entry decisions.
• 💡 Intraday trend change confirmations are crucial before taking a trade based on a gap and key level analysis.
• 💼 The video suggests that there are premium trading guides available for a deeper understanding of these concepts.

Q & A

What is a gap up in trading?

A gap up is when the price opens higher than the previous day's close, indicating a price increase at the market open.

What causes price gaps to occur?

Price gaps often occur due to news releases outside of regular trading hours that cause significant swings in price.

Can you explain what a gap fill is?

A gap fill is when the price returns to the pre-gap price level, indicating that the price movement caused by the gap was not sustained.

Why do gap fills happen?

Gap fills occur when the driving force behind the gap was based on irrational or emotional factors rather than true fundamental factors.

How does the width of a gap affect trading strategies?

The wider the gap, the more overbought or oversold the stock is perceived to be, which can trigger a more drastic move in the opposite direction, making wider gaps ideal for gap fill reversal trades.

What is the significance of a gap up or down in relation to key levels?

A gap up or down into key resistance or support zones can present a trade setup, as it indicates an overbought or oversold condition at significant price levels.

How do false breakouts relate to gap trading?

False breakouts can occur when price gaps slightly past a key level, trapping breakout traders. This can trigger drastic moves in the opposite direction as stop losses are hit.

What is the role of Bollinger Bands in gap trading strategies?

Bollinger Bands can confirm if a price is extremely overbought or oversold when it breaks outside of the bands, providing additional confirmation for gap trading strategies.

How can intraday trend change confirmations be used in gap trading?

Intraday trend change confirmations, such as a break of a trend line or a higher high, signal a potential entry point for gap trades based on the intraday time frame analysis.

What is a gap fill completion at a key level and why is it significant?

A gap fill completion at a key level signifies that the price has returned to a fair valuation, attracting value buyers and short sellers closing their positions, creating a confluence of interest and a high-quality trade setup.

What additional resources are available for traders to learn more about gap trading?

Premium trading guides that complement the video content are available on the website WIS trade.com, offering a deeper understanding of gap trading concepts.