Fun Filled Gaps

By Ryan Litchfield

Neither Better Trades or any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any particular individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also Better Trades personnel are not subject to trading restrictions. I and others at Better Trades could have a position in a security or initiate a position in a security at any time.

Fun Filled Gaps

Maybe it depends

 Gaps can be traumatic

Even if expected (earnings)

They can also be VERY PAINFUL

If they go against you If you dont know what to do

or VERY PROFITABLE if you know what to do

It GAPPED Now what?

My stock just gapped is it important? How should I play it? - It depends Will the gap fill?
Maybe It depends

Does it confirm a directional momentum?

Maybe It depends

Relativity
Why so much attention?
It can be important It depends

History History History Generalizations can be dangerous and misleading How do I play gaps? -- It Depends

Relevance
Filled slow
Enhances the message

Filled fast
Gap is less significant

Touch and go
Anxious and confirming

Solid hit
Consensus

Opening (approach)
A pivot point and a scrimmage line

Gap Theory
3-4 Gaps typical pattern Breakaway gap Continuation - Confirmation Exhaustion

Classic Patterns
Theory Each trading opportunity must be evaluated in context of that stock or index History trumps a classic profile Frequency can dilute the significance

The Boy That Cried Wolf

Variety
True
Clean Dirty often Breakouts, Retracements, Reversals

Body
Less significance relative, Can be good for Opening Gap trades

True Gaps

True and Body Gaps

Breakaway Gap

Applications
Do all Gaps fill? Past is prologue Classic Patterns Compression release Pattern breaks (Breakout/down Gaps) Breakouts at all-time high (Volcano) Gaps to pivot points (no coincidence) Opening gaps (Skip or Rebound) Setting Stops

Checklist Gap Trading

Checklist Gap Trading
History
Gap Theory 2, 3, 4 Frequency (too much, periodic, rare) Accuracy (precise, sloppy gap to pivots) Size (consistent erratic, playable intraday?) Event / earnings Fill style (frequency, speed) Body Gap / Intraday Fills

Patterns to Know

Gap To Pivot Point

Precision Gaps

Sniper Shots

Close Shave Fill?

Bulls eye

Line in the Sand

Rare and Powerful

Candlestick Patterns

Opening Gaps
Are they a
Real reflection of a change of value Testing the water Underestimated Overstated

You never know until the full market opens Premarket trading can give you a clue but?

Intraday Gaps

Opening Gap Plays

How big does it need to be?
$ 1.50 +

History backs up the fill probability Pivot Point Strike Price

Close to the money Delta > 50%

Spread tolerable

Premarket Influence

Skip vs. Rebound

Opening Gaps either fill or not Tradable gaps either SKIP or REBOUND Skippers Gap open and then keep going in the direction of the gap
May or may not be true gaps

Rebounders gap open and then return to fill the gap

Skip Trade

Skip Trade

Skip Trade

Rebound Fill or Not

Setting Stops
First day
Hold stop on the pre-gap side (allow for the fill)

Third Day
After 2-3 days without a fill , move stops across the gap and follow the trade

Adjust to where you are on the field

Moving Stops With Gaps

Where Are You On The Field?

Applications
Do all gaps fill? Past is prologue Classic Patterns Compression release Pattern breaks (Breakout/down Gaps) Breakouts at all-time high (Volcano) Gaps to pivot points (no coincidence) Opening gaps (Skip or Rebound) Setting Stops

Next Paid Online Class

Checklist Trading
Thursday, Dec. 8 8 p.m. EST
When you close the class, wait for the class description to pop up, then follow the instructions to sign up for the next class.

$99 only if you register online

Neither Better Trades or any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any particular individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also Better Trades personnel are not subject to trading restrictions. I and others at Better Trades could have a position in a security or initiate a position in a security at any time.