Are you trading the gaps? Do you want to be trading the gaps? Better yet, do you want to be successful while trading the gaps? Maybe an even better question yet is, do you even know what a gap is?
Last week the ES Futures had a significant gap down. As a day trader and swing trader, I knew I potentially had an excellent trading opportunity headed my way. Were you able to recognize it? If not, that’s okay. If you are still just trying to figure out what a gap is, that’s okay too. Stay with me because, in this week’s video, I will detail how I used the gaps for targets throughout the trading week.
First of all, for those of your still wondering what a gap actually is, a gap is where price closes at a certain price and then opens either higher or lower from that price.
An example of a gap is stock XYZ closes at $10 on Friday. On Monday, when the market opens, XYZ’s first trade price of the day is $12. This $2 increase is a $2 gap up. Forex, Futures, and stocks all gap up and down occasionally.
Once I identify a gap, I highlight that zone, which I demonstrate in my video. The gap zone tends to fill much faster when the gap is small. It usually takes days or weeks with more significant gaps before they are filled.
If you prefer a conservative approach when trading the gap, you will want to set your targets at the beginning of the gap. However, for those that like to trade a little more aggressively, targets can be placed at the close of the gap.
You will also see when you watch my video, that last week was a perfect example of how I used the gap zone as an upside target area for the MES futures contract. I chose not to target the gap fill on the trades I placed before MES was trading in the gap zone. Instead, I used the lower portion of the gap zone as an area I would target. Once my Intraday Bias Indicator was bullish I started to trade in the direction of the gap. As you will witness, I was able to catch almost a 40 point move in the MES contract, which has been one of my biggest trades, as far as points are concerned.