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.

Outlines

00:00

📈 Understanding Price Gaps and Gap Fills in Trading

This video segment introduces viewers to the concept of trading price gaps, which are significant price movements that occur when the market opens, leaving a 'gap' on the chart between the previous close and the current open. The segment explains the difference between a 'gap up,' where the price opens higher than the previous day's close, and a 'gap down,' where it opens lower. It also discusses the phenomenon of 'gap fill,' where prices return to the level before the gap occurred. The reasons behind gap fills are explored, attributing them to either emotional or fundamental factors. The video emphasizes the importance of the gap's width, suggesting that wider gaps can lead to more significant price reversals. Strategies for trading gaps are introduced, focusing on combining price gaps with key support and resistance levels to identify potential trade setups.

05:00

🚀 Advanced Trading Strategies with Price Gaps and Indicators

The second paragraph delves into more sophisticated trading strategies involving price gaps. It discusses how to use gaps in conjunction with key support and resistance levels, Bollinger Bands, and intraday trend changes to enhance trading decisions. The segment provides examples of how to identify oversold and overbought conditions using wide gaps and candlestick patterns outside of Bollinger Bands. It also illustrates how to use these indicators to confirm entry points for both long and short trades. The video uses case studies from stocks like Tesla, Shopify, and Vimeo to demonstrate these strategies in action. Additionally, it touches on the importance of trend change confirmations and how to use them to time entries and exits effectively. The video concludes by encouraging viewers to engage with the content and suggest topics for future videos, while reminding them to like the video to support the creation of more free educational content.

Keywords

💡Gap Up

A 'gap up' in trading refers to a situation where the price of a security opens higher than its previous day's closing price. This typically occurs due to news or events that influence the market outside of regular trading hours. In the video, 'gap up' is used to illustrate a scenario where traders might consider selling short if the gap is based on non-fundamental factors, anticipating a price reversal back to the pre-gap level.

💡Gap Down

Conversely, a 'gap down' happens when the price of a security opens lower than its previous close. This can also be triggered by significant news or events. The video explains that a 'gap down' might represent an overreaction to negative news, potentially leading to a price recovery or 'gap fill' if the initial cause was not fundamentally justified.

💡Gap Fill

A 'gap fill' is when the price of a security returns to the level before the gap occurred. This concept is central to the video's theme, as it suggests that prices may correct to a more rational level after an initial overreaction. The video uses 'gap fill' to discuss trading strategies where one might expect a reversal of price movement after a significant gap.

💡Overbought

In trading, 'overbought' refers to a security that has increased significantly in price and is considered to be at a higher-than-normal level, often due to market hype or speculation. The video mentions 'overbought' in the context of a 'gap up' scenario, where a stock might be overvalued temporarily, leading to a potential gap fill and price correction.

💡Oversold

Similarly, 'oversold' indicates a security that has declined significantly in price and may be undervalued. The video discusses 'oversold' in relation to 'gap down' situations, suggesting that if a stock price drops too low due to irrational factors, it might rebound back to a fair value.

💡Key Levels

Key levels are price points that traders use to identify potential support and resistance areas. The video emphasizes the importance of combining 'key levels' with gap analysis to spot high-probability trading opportunities. For instance, a 'gap up' into a key resistance zone might signal a short trade setup.

💡False Breakout

A 'false breakout' occurs when the price of a security moves past a significant support or resistance level but fails to sustain the move. The video describes how a 'gap down' that slightly surpasses a support zone can be a 'false breakout', potentially leading to a sharp reversal and a buying opportunity.

💡Bollinger Bands

Bollinger Bands are a technical analysis tool that consists of a middle band (typically a moving average) and two outer bands that represent standard deviations from the middle band. The video uses 'Bollinger Bands' to confirm overbought or oversold conditions, suggesting that a price far outside these bands might indicate an extreme condition that could lead to a reversal.

💡Intraday Trend Change Confirmation

This term refers to the process of confirming a change in the short-term trend of a security's price. The video suggests looking for an intraday trend change before entering a trade, such as a break of a trend line or a higher high, as a signal that the trend might be reversing, especially in the context of gap trading strategies.

💡Confluence

In trading, 'confluence' refers to the meeting point of multiple technical analysis signals, which can increase the reliability of a trade setup. The video mentions 'confluence' when discussing how a gap fill at a key support level, combined with other factors like trend changes, can create a high-quality trading opportunity.

Highlights

Learning how to trade gaps is a valuable skill that many traders overlook.

A gap up occurs when the price opens higher than the previous day's close.

A gap down is when the price opens lower than the previous day's close.

Price gaps are often caused by news releases outside regular trading hours.

A gap fill is when the price returns to the pre-gap price level.

Gap fills happen when the cause of the gap is based on irrational or emotional factors.

If a gap up is based on credible information, the high price is likely to sustain.

A gap up based on hype or fake news indicates an overvaluation and potential price correction.

The wider the gap, the more significant the potential move in the opposite direction.

Combining price gaps with key levels can provide valuable trading setups.

A wide gap up entering a resistance zone presents a short trade opportunity.

A gap down into a support zone with multiple long candles indicates an oversold condition.

False breakouts can lead to drastic moves in the opposite direction.

Combining price gaps with Bollinger Bands can further confirm overbought or oversold conditions.

Intraday trend change confirmations are crucial before taking trade entries.

A gap fill completion at a key level presents a high-quality long trade setup.

Value buyers and short sellers closing trades can create a confluence at gap fill levels.

There are premium trading guides available for a deeper understanding of these concepts.

Transcripts

in this video we're going to show you

how to trade price gaps like a pro

learning how to trade gaps correctly is

a cheat code that most Traders will

never discover as always please hit the

like button as it allows forour team to

continue to produce more free content on

YouTube what is a gap up a gap up is

when price opens higher than the

previous day's close you have your

candle Clos and Market close followed by

a gap up of price once the Market

opens what is a gap down

a gap down is when price opens lower

than the previous day's close you have

your candle close and Market close

before a gap down occurs once the Market

opens price gaps often occur due to news

releases outside of regular trading

hours that cause swings in price what is

a gap

fill a gap fill is when price returns to

the pregap

price you have your Gap up and price

isn't able to sustain the higher price

and reverses back to the pregap

price you have your gap down and price

isn't able to sustain the lower price

and reverses back to the pregap

price so why do Gap fills occur a gap

fill occurs when the driving force

behind what caused the Gap was based on

irrational or emotional factors and not

based on true fundamental factors if you

see a gap up and the reason for the Gap

up was based on something credible like

a surprise massive beat in earnings the

high High gapped up price will sustain

and even possibly go higher if you see a

gap up based on just a hype up news

piece or even fake news then the higher

gapped up price represents an

overvaluing of the stock also known as

overbought and the price will correct

back to the pregap price so that the

stock is back to being fairly priced now

a key Point The Wider the Gap is the

more overbought and overvalued the stock

is which can trigger a more drastic move

in the opposite direction wider gaps

make for better Gap fill reversal trades

going in the opposite

direction if you see a gap down and the

reason for the gap down was based on

something solid like a surprise Miss in

earnings the lower gapped down price

will sustain and even possibly go lower

if you see a gap down based on just a

hit piece or even fake news then the

lower gapped down price represents an

undervaluing of the stock also known as

oversold and the price will correct back

to the pregap price so that the stock is

back to being fairly priced Again The

Wider the Gap is the more oversold the

stock is which can trigger a more

drastic move in the opposite direction

wider gaps make for better Gap fill

reversal trades let's now dive into the

strategies

section combining price gaps with key

levels these reversal points give you

your key resistance Zone price then

forms a gap up and enters the Zone which

presents a short trade setup notice how

wide this Gap up is and the wider the

Gap the more overbought the stock is the

reason this is a great short trade setup

is because you have short sellers

looking to enter short trades at the

zone as well as the price of the stock

being overbought and overpriced as

always you need to look for an intraday

Trend change confirmation before taking

a short entry now along the bottom these

reversal points give you a key support

Zone you have a gap down into the

support Zone with multiple long with

candles and price being oversold which

presents a long trade setup another gap

down into the support Zone and price

being oversold which presents a long

trade setup let's show this

again this reversal Point here gives you

your key support level as price comes

back down you have a gap down slightly

past the Zone which is a false breakout

and traps a lot of breakout short

sellers false breakouts can trigger

drastic moves in the opposite direction

due to all those breakout short sellers

having their stop losses hit once price

reverses once you had the break of trend

line and higher high that is your Trend

change confirmation and is when you

would look for long trade

entries this is a quick In-N-Out trade

we took on the paler stock these

reversal points here give you your key

support Zone as price comes back down

you add a gap down into the Zone which

presents a long trade opportunity so you

need to look inside of this area here

but on a lower intraday time frame for a

trend change confirmation so let's pull

that up on the left is the paler daily

time frame we just looked at and on the

right is the paler intraday time frame

this trade setup area here is this same

area here you have a falling wedge

pattern and once it breaks above with a

gap up you would look for a long entry

point using our entry strategy your exit

Target would be this Zone here now

here's where the magic happens combining

price gaps with key levels and with

Ballinger Band

Breaks before we continue we want to

hear from you tell us in the comments

below right now what video topics we

should cover

next

as always please hit the like button as

it allows for our team to continue to

produce more free videos on

YouTube these two reversal points give

you your wide support Zone as price

comes back down you have a very wide gap

down which represents a very oversold

price you also have multiple candles

breaking outside of the Ballinger band

which further confirms the price is

extremely oversold once you have an

intraday Trend change confirmation you

would take a long entry using our entry

strategy let's show this

again these two reversal points give you

your wide support Zone price then gaps

down into the zone you also have a

candle that breaks far outside of the

Ballinger band which further confirms

the price is extremely oversold once you

have an intraday Trend chains

confirmation you would take a long

entry this is the Tesla stock trade we

took using this exact strategy these two

reversal points give you your key

support Zone that is also a a weekly

Zone this zone is also inside of the 50%

to 61.8% FIB Zone making it a

highquality area of value price then

gaps down into the zone and breaks

outside of the Ballinger band

representing an oversold price and

presents a long trade opportunity once

you have an intraday Trend change

confirmation you will take a long entry

using our entry strategy your target one

is this reverse Point

here this is the Shopify stock trade we

took using this exact strategy these

reversal points and false breakout give

you a key resistance Zone as price comes

back up you had a wide Gap up into the

key Zone which presented a short trade

setup price also breaks outside of the

Ballinger band which represents an

extremely overbought price once you have

an intraday Trend change confirmation

you would take a short entry using our

entry strategy your target one is this

reversal Point

here this is the Vimeo stock this

reversal Point gives you your key

resistance Zone as price comes back up

you put a wide Gap up into the key Zone

which presented a short trade setup

price also breaks outside of the

Ballinger band which represents an

extremely overbought price again once

you have an intraday Trend change

confirmation you would take a short

entry now there are many Advanced

methods we use to find intraday Trend

change confirmations but here's one

simple

way this is the Disney short trade we

took these reversal points give you your

key Zone as price comes back up you had

a gap up into the key Zone which

presented a short trade setup price also

breaks outside of the Ballinger band

which represents an extremely overbought

price so you need to look inside of this

area here but on a lower intraday time

frame for a trend change confirmation so

let's pull that

up on the left is the Disney daily time

frame we just looked at and on the right

is the Disney intraday time frame this

setup area here is this same area here

you had a head and shoulders reversal

pattern and your entry could have been

on the break here or at the pullback but

a better entry is using our entry and

exit strategy so moving on a gap fill

completion at a key

level you have a clear strong moving

uptrend so you want to trade with the

trend these reversal points give you a

key level this is your Gap up here price

comes back down and fills the Gap right

at the key support level which presents

a long trade setup the reason this is a

high quality trade is because the Gap

fill completion means prices back to

being fairly priced so value buyers will

step in at this level short sellers will

also close trades at this level knowing

the Gap is filled and price no longer

being overbought key support level

buyers will also open long trades at

this level all of this creates an area

of Confluence and presents a highquality

long trade setup let's show this

again these reversal points give you a

key level this is your Gap up here price

comes back down and fills the Gap right

at the key support level which presents

a long trade setup once you have an

intraday Trend change confirmation you

would take a long entry using our entry

and exit strategy so what we've covered

in this video is only scratching the

surface there is a series of Premium

trading guides that work in combination

with this video and are required to have

to fully grasp these Concepts they are

available on our site at WIS trade.com

the link is also in the descript deson

below tell us in the comments below

right now what topics we should cover

next be very

specific make sure to hit the like

button as it allows 4our team to

continue to produce more free content on

YouTube