Trading Review’s mission is to help you become a better and smarter trader/investor through in-depth reviews of courses, trading software, and more. The price doesn’t always return exactly to where it gapped from. Sometimes it retains some of its gains/losses, so that it only partially fills the gap. The risk/reward ratio of the gap and go strategy is excellent. With a small stop loss, you are risking very little money to make much more. This is what makes the strategy so profitable in the long term.
A deeper dive shows that the reason for the price action is that the company reported weak earnings. Using Trade Ideas can save you many hours of research and help you find these opportunities quickly. A gap and go trade is a momentum based strategy that utilizes a stock’s tendency to gap up or down after earnings.
Gap Trading: How to Play the Gap
This will allow you to make more money in one day, as well as diversify your risk in case one of your trades doesn’t work out. By definition, gaps occur quickly and without notice, making it difficult to position in advance of a price gap. You might be lucky and long a security, and it gaps higher, leaving you with a quick profit, or vice versa.
The news always comes before the Gap & Go price movement, not vice versa. In our stock trading community, you’re going to get it all. Each day we have several live streamers showing you the ropes, and talking the community though the action. What we really care about is helping you, and seeing you succeed as a trader.
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Gaps occur because of underlying fundamental or technical factors. For example, if a company’s earnings are much higher than expected, then the company’s stock may gap up the next day. This means that the stock price opened higher than it closed the day before, thereby leaving a gap. When looking for a Gap and Go strategy with high continuation momentum of the gap-direction, you have to know why the stock gaps. If there is only general market news or an unknown reason, keep your fingers far away from any buy or sell order.
If the gap is sustainable, then the gap price level/zone should provide an opportunity to get in on the directional move of the gap at a better price. We will help to challenge your ideas, skills, and perceptions of the stock market. Every day people join our community and we welcome them with open arms.
What is a gap in trading?
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- Often these stocks have just reported great news and even thought it’s chasing to buy a stock up 10% they can continue to run another 10% or more in the first 30 min.
- Gaps occur because of underlying fundamental or technical factors.
- You have to avoid being the last person in the queue before prices change direction.
You would have made more money if you sold at the top red warning candle. However, you would have made over $1.00 per share using the ride the 9 gap and go strategy. If you got a good entry on a pullback to the 9 ema on the green candle (entry) below, you could have rode the 9 ema until you got your 1st candle close below the 9 ema. In this article, I am going to discuss How to Day Trade with 5 simple GAP Trading Strategies.
How to Trade Gap and Go
However, once earnings happened, the price gapped up majorly. As a result, anyone trading stocks or options with a bullish bias was greatly rewarded that day. In the gaps strategy picture above, you’ll see that $DCIX had a lot of premarket volume. As a result, it was gaping up over the previous close line (orange dots).
Our watch lists and alert signals are great for your trading education and learning experience. It would be best to have discipline, patience, and proper risk management to succeed at trading. The previous day it had been red, with the stock falling about $10. To guess this strategy, you need everything to go correctly. If you want to build wealth, you must not yolo your money in the market. The gap and go strategy is one of the most important ones in the financial market because of how often it forms and how easy it is to use it.