Trading Gaps for Daily Profit

Trading Gaps for Daily Profit


hey my friend thank you for watching
this video on trading gaps for daily profit this is Barry burns with top dog
trading and let’s jump right into it so training gaps is one of those classic
techniques that everybody learns normally right at the beginning of their
trading career and it’s a very very popular way of trading it’s very
appealing in the sense that it looks easy at first glance and it also is one
of those things that doesn’t work as well as it used to and it doesn’t work
the same way as it used to work but that’s not surprising because it is so
popular anytime anything becomes popular guess
what that’s raid about the time it stops working everybody knows about it
everybody starts trading it and guess what most people lose money so once
everyone starts doing something it stops working
you’ve got to have an edge by that I mean you can’t be doing the same thing
everyone else does so here’s the classic pattern that people are always looking
for so we’ve got one day here by the way these are California times down here and
this is a daily no it’s a three-minute stock chart and so you’ve got your open
way down here and the previous day closed way up there in the easy way for
trading gap trades gapped reading strategies gap trading intraday gap
trading rules whatever is to just say okay I’m going to trade it back into the
close of the previous day in Japanese candlestick patterns by the way they
also traded gaps and they call it closing the window so it’s really
nothing new to the Western world the Japanese were way ahead of us on that so
they said okay windows open and now it’s going to close all righty that’s great
any yep that’s fun when it happens but it’s not the way it normally happens
anymore I’m sorry they never make it easy for us to do it do they okay but
obviously it’s still that happens sometimes and there is an example now
let me show you what happens most of the time these days here’s another example
and if you were you say alrighty we closed here this day
and we opened down here this day and I’m just going to trade the gap clothes
right away you’d be a sad little puppy because it
didn’t close right away in fact let’s watch this whole day see how it closes
when it closes all right so we think well okay I’ll just treat it later in
the day and the day ends there’s the end of the day and it still didn’t reach the
gap close there’s the line right there so one of the questions when it comes to
technically how to trade this is alright where do we put the line so if we’re
looking for the gap to close now technically you would say we should do
it at the previous day’s close because that is literally closing the gap it
closed at one price one day and then it opens at another price another day and
you’re waiting for it to close or get back to the close of the previous day
that’s not the best way to do it the best way to do it in my opinion is to
look for the little low there and that’s just a more conservative way to trade it
because I’ve seen many times where if you put it at the close or the last bar
could be a green bar and it may be the close would be up there then and the
markets are not that perfectly neat and tidy and so they’re kind of messy and
they’re messy because you’ve got millions of people all over the globe
trading and teen different things different time frames and so forth so
don’t expect it get to the exact penny pip tick or pixel on your chart that you
wanted to get to allow for that messiness would be conservative and
place it at the lowest low there and wait for it to come back into that level
ok so now that we have established that technique here’s the other thing that I
want to share with you after at the market gaps quite often what happens is
it goes kind of sideways for most of the day in fact yeah
so what happens there you go big move down with our nice gap boom
okay and goes all the way on actually goes all the way down to there in the
first three minutes so from there to there in the first three minutes what
happens the rest of the day not a whole heck of a lot of anything alright it
just kind of goes sideways that is what normally happens now that is the norm
that is what you will see more days than not and remember trading is about
trading probabilities and we never know what’s going to happen there are no
certainties so we’re trading probabilities and this is the
probability scenario and part of the reason logically is because after the
market has a big move down and remember this is not showing any pre or post
market data because if you show pre and post-market data you won’t see the gap
so there’s been trading that’s going on over an eighth day or early in the
morning before New York opens and now so what’s happened is a bunch of people
shorted and when the market opens open outcry and most people are looking at
their charts they’re saying hmm dang I don’t know I’ve already missed out on
that big of a move so whatever I want to do do I want to go short now I mean the
dominant direction is down but I already missed out on all that so
psychologically the Masters are saying I’m getting in too late on the other
hand the sentiment is bearish so some people are thinking gap and ghost some
are gonna buy thinking that the gaps gonna close and you’ve got this conflict
so you’ve got people on both sides in the bottom result is that after gaps
quite typically on a daily or a intraday chart the market really just doesn’t go
anywhere just kind of goes flat for the rest of they it’s usually not a great
trading market for the rest of the day so here we go and it’s a several days
down the the pike here about three days later and we get another gap so from
there to there do we get a gap close if you’re gonna trade the gap closed maybe
you even wait for the peak there to come back down nope sorry you are not going
to get it the whole day goes by and they does not ever close so what does happen
well just what I said gaps up and now we’ve got conflicting
views in so therefore the market goes sideways for most of the day it finally
does go up but again goes up in the afternoon after lunch actually so if you
are going to look for a market move after a gap usually it’s going to be
after lunch and that’s exactly what this is this is one o’clock New York time ten
o’clock California time and where does it go it goes back to this blue line hey
wait a minute what’s that blue line well that blue line if we scroll back that’s
where this gap started so the gap does close eventually this gap that we just
showed but it closes not the same day there’s day one and I’m gonna scroll
through faster the two nope day three yes yes so it took three days
for that gap to close therefore what I recommend is that you do put these
levels on your chart and make them something unique like a different color
or whatever color you want that you know means something to you but just that you
don’t use for anything else so you might use something that stands out you’re not
gonna use it for other support resistance levels so let’s say when they
use goldenrod okay and we’re going to make it a little thicker so it really
stands out and that whenever I see that line with that thickness I know oh wait
that’s where a gap close would occur and it is acting like almost like a magnet
really that yes the markets are very aware of gaps the masses are aware of
gaps no question about it and for that reason they do tend to have a
self-fulfilling prophecy so I put it on there but I don’t expect us necessarily
going to fill in the first day or even two might take three I take more oh in
fact what the heck let’s look further let’s take that puppy off of there and
let’s look in some further examples here so here we get another gap from there to
there that’s the open and that doesn’t close there’s your gap from the previous
day okay so that one doesn’t close and we do not close that day let
me just put the line on there again make this clear for you so there I would put
it there see now this day we closed here but I wouldn’t put my line there I’m
gonna put it down here just to be conservative right so then now look what
happens this is cool let me ask if that’s all in one chart you can see this
so we gapped down this day we don’t fill that gap that day again notice how the
market kind of just goes sideways for you know most of the day then the next
day the gap fills but you don’t really have a chance to take the trade for the
gap fill because it gapped up into the gap fill so it gets down and then it
gets back up into the gap fill well great no opportunity to take that trade
unless you were treating overnight again we get the same dynamic here that I was
talking about a pretty good gap up okay goes up and then what’s it do for the
rest of the day just kind of go sideways sorry not really anything exciting to do
if you didn’t want to do something and be in the afternoon take that little
move there so now this level it’s not only a gap closed but it is a support
levels the market bounces off of it comes back again as support in bounces
back off of it alright goes back on up and let’s see there we go get another
one good fact we got two more so let’s look at these real quick I’ve got a gap
up market again it doesn’t really go up much from there it goes kind of sideways
does not fill the gap next day gaps up it’s a gap and go goes up but again what
most of the day after reaches its high it’s just going sideways the afternoon
you get your movement where it breaks out alright well if you like this video
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26 Comments

  • bluenetmarketing

    October 17, 2017

    Thanks for the video and information, but I cannot believe you have California time on your charts instead of NY time. I ALWAYS use NY time on my charts.

    Reply
  • Adrianna De Santos

    October 17, 2017

    What time frame is this?

    Reply
  • Raja Jani

    October 17, 2017

    great job sir, keep guiding … my regards

    Reply
  • pmcllc

    October 17, 2017

    Interesting thank you!

    Reply
  • Sangam Baligar

    October 17, 2017

    Everyone knows that gaps will be covered over time . But you dint really tell how to trade the gaps…

    Reply
  • Hayward Huntsberry

    October 17, 2017

    Would you do a video on reversals?

    Reply
  • Rick P

    October 17, 2017

    Good stuff once again Doc! I' ve noticed it does indeed take sometimes weeks to completely fill a "gap" whether up or down so thanks for the reminder that it very seldom works the next day overall like it use to. Traders beware!

    Reply
  • N Charles

    October 17, 2017

    Excellent Stuff.

    Reply
  • Rita50

    October 17, 2017

    Basically no strategy. Waiting 3 days for some gap to close. I'm not even come close to this strategy.

    Reply
  • ငထင္ငယ္ စက္ရွဳပ္

    October 18, 2017

    I interest ,thanks.

    Reply
  • ငထင္ငယ္ စက္ရွဳပ္

    October 18, 2017

    I interest ,thanks.

    Reply
  • ငထင္ငယ္ စက္ရွဳပ္

    October 18, 2017

    I interest ,thanks.

    Reply
  • K Ragas

    October 19, 2017

    I know you cant determine 100% but how would you know if it will gap back up/down after consolidating the whole day? I have been watching a stock that has been doing morning gap down every morning for the past few months and is already passed its previous 52 week low. I am looking for a sign of trend change (20 & 50 EMA to start trending up) but every morning it gaps down then consolidates throughout the day. Great video by the way

    Reply
  • Ron Snew

    October 22, 2017

    Thank you for your video. I don't totally agree with you in re: the difficulty in profiting from gaps – though I trade longer time periods, and am patient. With relevant indicators, I can and do profit most of the time with gaps. Of course, one must study the price action/tendencies… Still, I agree with almost everything you noted. (^^)

    Reply
  • Tushar Kalbhor

    March 6, 2018

    When you see in 1st hour trend is not going as expected, you can go for ORB (Opening Range Breakout) strategy.

    Reply
  • Lavender Lively

    August 10, 2018

    Thanks, Barry! You're the best!

    Reply
  • Freq 123

    August 19, 2018

    So if it stops working because everyo e knows it…..why talk about it for free where most views will occur? Sir?

    Reply
  • Chewie 13

    October 17, 2018

    thanks

    Reply
  • Steven Sipeki

    October 27, 2018

    Great video, TY.

    Reply
  • خالد العطوي

    November 9, 2018

    thanks … good very good

    Reply
  • EiDoDoos

    February 1, 2019

    tq for free tips. very helpful for beginner like me. btw, can you make video about time zone. how to identify most best time for our local time?

    Reply
  • sunil kumar saini

    March 10, 2019

    nice explain

    @

    Reply
  • sunil kumar saini

    March 10, 2019

    nice @

    Reply
  • sunil kumar saini

    March 11, 2019

    sunilkumarsaini

    Reply
  • Vermont24

    March 18, 2019

    Dr Burns : Thanks a bunch for the video …  some guys say that Volume traded (in real time,  is important for trading the Gaps ) , some others use  Chaikin, others use Level 2,  but level 2 its kind of confusing …..   is there an alternative to avoid using  Level 2  ( Some indicators Maybe  ?  — Instead  Level 2 — ? )  Thank you in advance .

    Reply
  • theofilos tzinikos

    May 30, 2019

    tesla has a good gaps and generally fills

    Reply

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