0:01 All right, welcome everybody. Thank you for your patience. How we doing? How we doing? I see a lot in the chat. A lot of people in the chat. I love it. Welcome everybody. All right. All right. So, today we are going to be talking about gap trading and not just gap fills, not just gap extensions. We're going to cover everything here. And so, this is this is going to be a two-parter. This is a big one here. We're we're ramping it up. So, today we're going to be talking about the multiple setups. And then next week we're going to be really really honing in on the risk management on the intricacies of trading some of these and um how to kind of bring it all together. So if uh we are going to be doing questions at the end but just keep in mind that there will be more to come. This is a big topic to cover and I didn't want to I didn't want to miss anything so it had to be divided into
0:48 two. But this is uh this is super useful because gap trading is one of the most um the most replicable most reliable setups. it always there is always going to be a gap up or a gap down on any given day and knowing how to trade those can really help you as a consistent trader to just lock in these little um little very high probability trades. So I think it's a very important tool to have in your toolbox and I'm excited to talk about it because I trade a lot of gaps myself. So yeah, let's let's get into it here. Alrighty. There we go. Welcome coming from Trader TV. Thank you so much guys. I appreciate that. Um, we uh we have a lot of fun on there. He got me hungry though, thinking about all those tacos and burritos. So, after this, I'm
1:33 going to I'm going to go hit up the local Takaria, I think. But until then, we're going to talk about gaps. So, there are multiple types of gaps and it's really important to be able to identify the differences in them. So, we have the traditional gap fills. you know, okay, stock gapped up overnight and then sellers came in and they push it back and they fill the gap. And that's a very common occurrence. Um, we we also have a lot of other setups though that don't get talked about quite as much. So, there's gap continuations, which are essentially a gap up, then it consolidates, and then it continues up in the in the gap direction. Uh you'll see these a lot on earnings and stuff and um they they they can be very explosive when you do get that continuation move, but they usually have
2:19 to be driven by fundamentals as well. You have uh post earnings gaps and news trading gaps, which are two examples of those fundamental driven gaps and those are um those are ones that I often look for for those continuations. But of course, you have to align the fundamentals with the technicals for these setups. Um, intraday gaps are a thing as well, especially if you're trading small cap stocks. You'll get some uh some halts and things like that. And there are some very uh very interesting strategies you can use to capitalize on those moves, too. So, the important thing is that there are like five to 15 tradable gaps in the market every single day. And just just knowing how to how to scan for these, how to have these on your radar can just lock you in some really nice wins every single day if you're uh if you're on top
3:04 of it and able to play them. So yeah, uh gap fills here are when price obviously returns the gap. This one single uh signals a strong directional move and then you have your your news and your earnings, all of that. But it's just uh it's just important to remember that they're very uh distinct setups. So that's why we're going to kind of talk about each individually because uh you can't play a gap fill like a gap continuation or else you you'll get hurt. So uh being able to identify them is pretty key. So, why why do we want to trade gaps? What are the actual uh benefits here, you know? Well, I I think that it's really important that uh that you're able to to find these uh these clear riskreward setups where you have the defined entry, you have the defined
3:49 exit, and it's it's a lot less uh less guesswork. A lot of times, um the market's kind of showed its hand already with the gap, and now you're either playing a mean reversion move or a trend continuation move depending on the setup. But either way, you know where your stops are, you know where your targets are for the most part. And it's uh like I said, very reliable. It's a it's a key component to any trader skill set. They give you multiple multiple opportunities every day across all asset types. So, I know we got some folks in here from the the Fiverr community and you guys like to trade forex and all this fun stuff that I'm not super familiar with. But the good thing is gaps are going to happen on a daily chart every single day, you know, especially when you're trading something like Forex and there's a lot of moves overnight with other markets. So this is
4:35 not just a just an just a stocks thing. This is not just a crypto thing, forexing. This is a universal concept. So I think it's super super applicable. Um it works in multiple market conditions, too. you know, whether it's a bull market, bare market, or the the the infamous crab market, you know, you're always going to find these and it's just uh just a uh natural result of market mechanics. So, it's great to have on your radar. And uh yeah, this these strategies work on any size account, too. This isn't like an a strategy you can't you can't do on a super small cap uh kind of company because those those have more gaps, right? So I I think there's a lot of reasons why gap trading is a is a handy tool in your repertoire there. So today we're going to talk
5:21 about a complete gap classification system. You're going to be able to how to uh to recognize the differences in these gap setups and hopefully identify them, play them correctly, and just uh improve your win rate pretty easily. We're going to talk about um matching the right strategy with the right gap type. That's super key. And um we're we're going to get into some some advanced timing techniques in terms of entries and exits. We're going to get into the risk management framework because it's super super key like with any system to practice this risk management. Although with gap trading it's nice because you have your levels so well defined with uh you know the gap up the gap down and uh it it just or the top of the gap and the bottom of the gap essentially and uh the bottom of the candle that led into the gap and vice versa on the bullish side. So, uh, this
6:06 gives you a really, uh, strict parameters in which to trade with. So, if if you're somebody that maybe struggles with moving the goalposts and, uh, changing those stops, this could be a good strategy to practice because it, uh, it's it's a little bit easier to not fall fall prey to that because you have such defined levels. And let's get into the let's get into the meat and the potatoes here. So, complete gap taxonomy. First off, what what is a gap, right? And I I know it seems obvious, but it's just uh price discontinuity between trading sessions or time frames. So re regardless of whether it's a daily chart, weekly chart, hourly chart, you know, if you're trading intraday and you you halt up or something, uh there's a discontinuity between one one time frame and another. So that creates an
6:53 imbalance. And um imbalances love to be uh either either they like to be tested. They don't always heal completely. I think about 70% of uh normal gaps will will test but not not completely fill their uh their gap. But it's a it's a level of of um shoot what's what's the word for it? It's just a level that needs to be remeitated, retested. And uh knowing this, you can catch really easy mean reversion moves back into the gaps. you can catch some really good continuation moves by buying once it tests the gap and shows an incentive to continue the gap direction and yeah it's um they they always happen so you always want to have them on your radar. So the market
7:39 psychology behind these moves are essentially driven by a few few basic concepts. You have fear on the gap downs. Everybody thinks the world's ending and they just they just drive it down and it's an over oversized move compared to the actual news. And on the other side of that you have greed, right? It's the same thing. When you a good headline hits, people want to chase it. They fomo into it and that creates um very easy situations of mean reversion for uh for savvy traders like ourselves. So um the the last thing is that yeah essentially this when you get the fear or the greed that leads into a rational repositioning by smart market participants where they say okay this is this is running too hot. Sure, it's going to keep going higher, but I can fade this. And then once uh once we reconfirm the move by testing the gap
8:27 and saying, "Okay, we we gapped up. Now we're coming back to this level and there's still buyers. We're still in it. The narrative hasn't changed." And, you know, then you can catch the uh continuation there. So, it it just provides kind of like a it's like a little breather in a market for a second where it's like, okay, there is a catalyst. We made a move. Now, there's going to be a little bit of um of uh digestion of that move, and we can we can really hone in on the digestion. And by doing this, if you're trading like a breakaway gap, you get this great opportunity where you've already had the strength confirmed and then you're just looking for um for a continuation there. So, it it can uh keep you out of cho uh choppy stocks that are still basing. it can let you catch the the initial move and really really juice the returns by
9:12 not having your capital sitting in a stock that needs three weeks to to digest there. So, the formation mechanics um they hinge on a few different ones. Um it's order imbalances. You know, you you'll have way too many bulls and the the tape essentially didn't get filled. There's like a gap in the tape that just needs to be come to come back and be revisited. So, um institutional positioning plays a large factor in this. when they're in a stock and it gaps up big, they're going to take some profits even if they're still bullish and they're just looking to buy back in just a little bit lower. It's just a very logical thing to do from a riskmanagement perspective. And of course, the last one is news flow because when you when news hits the tape, that catches the uh the market flatfooted. That catches everybody offg guard to some degree or another. And so the the market has to rapidly repric the
10:00 uh the new catalyst. So, um, those are some of the the factors that that are going to determine whether a gap persists, whe whether the the initial move, the gap up holds and continues or whether it's just an exhaustion gap type move. And, uh, we we'll talk about both of those, but uh, yeah, it it's there there are ways to identify it. So, now let's, uh, let's talk a little bit about the psychology here. Whoops. Is this doubled the screen there? My bad. Um, the, uh, the six types of tradeable gaps that I really want to focus on are first off just the classic gap. And that's just going to be what you see, you know, like on SPY on any given day when there's a move overnight. It's not like some crazy crazy news catalyst.
10:46 It's just, you know, the market moved some overnight and that's created a gap on the daily chart of SPY. So when you when you get those between the open and close prices, uh it provides a very very uh high probability chance of a retest of that gap. So you can mark those gaps on your chart and you can take a look at how price reacts once it reaches that area and the the reaction there will give you uh a lot of hints about the direction we're going. So um there are partial gap fills. Like I said, not all gaps fill completely. And by identifying that change of character once it trades back into the gap, you can snipe some really good long entries um off the gap up. So, you know, you don't want to buy first thing in the morning when a stock gaps up. About 70% of those moves do mean revert back into the gap to some level. But by buying, once you
11:33 recognize, oh, there are still buyers here in the gap, then you can really really uh catch a nice entry for continuation swing. So you have uh you have the classic earnings and news gaps. Obviously big catalyst. It's going to move everything. And uh yeah, like I said, they're driven by fundamental news. So depending on the news, you have to kind of put your macro cap on and really think about what the implications are for the headline. So those can be a little tougher. But if you are a macro trader as well, you can really really uh catch some home runs here. You know, you you catch you see see the gap up. It's already on your radar because you like the fundamentals as is. the fundamentals improve, the stock price responds to it, it maybe dips just a little bit in mean reversion and then you get that entry for the big push up. So, uh that big big pushup
12:20 would be considered a breakaway gap. And a breakaway gap is essentially a gap that initiates a new trend. So, like I said, it's basing things look good on the fundamental side, but there's no catalyst. Then boom, good earnings, boom, good headline. You get that catalyst and that is initiating a new trend. um after the breakaway gap often you'll get runaway gaps or measuring gaps and these are essentially continuation moves and they accelerate existing trends. So we'll talk about how to identify those two and uh differentiate those from a exhaustion gap up which we might have seen on Nvidia. So um that's the next one. Yeah. And exhaustion gaps are essentially gaps that signal a trend completion. they are essentially um primarily positioning driven and um when you get a gap up and
13:05 it instantly starts selling off that's something you really got to watch for. Obvious obviously uh there there are certain factors that matter here and the biggest one is being very high volume. So, we'll talk about it in a little more detail later, but in general for these uh if a gap up is trading on like 500% of average volume and starts to fade, that's really scary because you get up to this to this big level on the gap up and then somebody big is just selling relentlessly. So, that's something to keep an eye out. Those are the main types here and uh yeah, there there are different ways to trade all of them. So, let's get into it. First off, I think it's really important to classify gaps um by the size of the move because the implications are very different across the board. There you have uh you have small moves. Like I said, on SPY, you'll get a lot of these uh quarter of a
13:52 percent to half a percent gaps and these these almost always fill. So, if I see a little gap up and I'm bullish overall, I'm I'm I'm sitting there just just rubbing my hands together waiting for that gap to get filled because very often they will and very often they'll start to reverse in that area. So, that's where I really get interested and start looking to uh looking to catch that change of character in the tape where the initial selloff after the gap up, you know, starts to round out and you can get those nice entries. uh you have smaller gaps, but not tiny gaps, but like call it a half a percent to 2% on an individual name. On on Spy, 2% is obviously a big gap, but you know, um the these don't always fill. It's a still a decent fill percentage, but often you'll get these partial fills on these moves where it'll retest the gap,
14:38 but it's not going to fill it completely. And uh we'll talk about where you can look in that gap to kind of identify levels where you can start to watch. And uh it's it's really cool. Once you once you learn the secrets, you'll be like, "Whoa." You'll pop that on all your gaps and you'll be like, "Oh, okay. He's right. That does work a lot." Um so medium gaps like two to 5% are they're um they're often news and uh earnings driven, but uh they're not as or pronounced as those crazy moves where something major hits the tape. Like think about like uh the tariff roll back announcement or the liberation day, you know, the tariff announcement where you just get these massive moves and those are very very like they they represent big fundamental shifts in the underlying the equity and those um they require
15:26 special approaches because it's it's a very uh uh it's an outlier situation. So just keep this in mind, you know, depending on the size of the gap, you have to have different considerations in how you're trading it. And I I do see uh your questions in the chat, guys. I'm going to be answering them all at the end. So, I I appreciate you um bearing with me here. We got uh we got market context and we got gap behavior. So, there there's a few things I want to talk about here. Um market context, it's super crucial because the same gap, like I said, it can behave completely differently based on different environments. And uh for example trending markets they will uh they'll create more breakaway and runaway gaps and they don't uh they don't always fill quickly you know so you can you can you
16:12 can in a in a very bullish market if you see these scenarios you can be inclined to catch the the little pullback but maybe not expect a gap fill and then you can look for extension there. So, if you're if you're in a bare market and you see a gap up, you got to be much more much more concerned about the potential for a gap fill and a gap rejection. Uh those exhaustion type moves we're talking about. um rangebound markets, they offer uh the most reliable gap fill opportunities, I'd say, because when there's, you know, a lot of chop in a mark and a market essentially overprices something on a gap up, very often the market will want to kind of revert back to the mean and just fill that imbalance before it really makes its decision on directionality, you know, whether it's actually breaking out
16:57 of the the sideways crab range. So uh high volatility is another factor here and uh essentially it creates more gaps obviously but it makes their behav behavior less predictable. So it's not necessarily like the kind of thing where you really want high volatility to reliably trade these gaps. It's just something to keep in mind that you know if you are in a high volatile high volatility environment uh the the statistics will not be as you know you will you will be seeing more failures than you a you would on average otherwise and uh also another thing is understanding sector rotation is super key and and essentially they can they can help you predict when the gaps will continue or
17:43 not. So uh zscaler today for example it gapped up and it just kept going right and so these are um these are driven by the fundamentals of the sector and by money coming into these sectors usually on the leader posting good results like zcaler. So we're also going to be talking about how you can play that if you missed the leader move too because there's a lot of uh a lot of ways to play the sympathy and catch that catch that alpha without exposing yourself to the one that's already quite extended. Um, let's see. Let's talk about the the actual the actual gap fill strategies and how to how to define them, how to how to identify them, how to trade them. And um, let's start with the basics. Let's start with the classic gap
18:29 fill. So, this is this is nothing crazy. You know, they're the foundation of all gap trading, I'd say. And, uh, essentially, you're looking for a gap that occurs without significant news, right? because this is a very different setup than a fundamental change in the market that will change dynamics and often have followthrough. These ones are just, hey, for whatever reason, it got bid up overnight, it got bid down overnight and it created imbalance, an imbalance in the chart. And so these are the ones that have about 70 to 80% fill rate. Um, if you're able to identify, you know, no news catalyst, uh, relatively rangebound market, that kind of thing, these gaps very often fill and they're they're a big part of my trading strategy where I'll see what gapped up that I'm that, you know, that I'm looking to play. And it's ve very common to get that fade back and then if it's
19:16 on my watch list, it's something I want along already. I love these setups where you can catch the little short and then it's right on your screen, right on your radar to flip long. So, I'm a greedy boy. I like playing both directions. I like catching the move down to pad my move up. All of a sudden, I have a cushion on a position I wanted already. So, you can get these kind of really nice risk returns with these setups. Um, another thing that's really important with these is uh don't don't rush into gap fills at the open. You know, you got kind of want to wait for price action and confirmation to confirm. So, that would look like something like, okay, it gapped up. I'm expecting the gap to fill. I'm not just going to slam short right at open. I'm going to probably wait about 15 minutes, half an hour. I want to see the initial volume kind of subside, the initial bullish continuation volume, and then I want to
20:01 see a change in character where we're starting to get a little bit a little bit weaker, you know, and then you can get a really nice riskreward chance because you're trading over the open and you're targeting under the open. So, that's a pretty good move. Um, what else here? So, you can place your stops beyond the the gap extremes essentially um with a little bit of volatility cushion. So, say below the the daily or below the candle. I'm sorry. Uh, okay. For a gap up, you can place your stop once you've seen the weakness in the morning, you can place your stop a little bit above the high a day. And if our thesis is right, it shouldn't sweep that out again because we've already gapped up. We've already like reached up for this liquidity. It's kind of like a mission accomplished, right? So, it hit its target, its
20:47 immediate upside target, and now we think about what what is its immediate downside target. And the logical answer is to fill that imbalance below that gap. So you put your stop a little bit above that top once you see that you know once you identify hopefully correctly that it is the top. And these will often occur about half an hour into the trading session just kind of as that initial push of volume subsides. But they can also occur an hour or so in. So just keep an eye you know everybody has their own systems for gauging weakness. For me, it'll often be on a fiveminute chart or a 10-minute chart when it loses a key moving average um or when it tags a key level above and shows, okay, there are sellers at this key level. So, um your target is the full gap, but you got to be prepared because they don't always fill like 70 to 80% do, but you know, 20
21:35 to 30 don't. And it's um it's really important to be able to recognize when uh when you're being a little greedy waiting for the full gap fill and when maybe you should probably be taking profits at certain places in the gap, like the 50% level of the gap. You can slap a fib on the actual gap itself. And you'll notice that 50% level is very key. And oftentimes moves will uh start to uh stop accelerating around there. you know, it'll accelerate into the gap and then it it will find some buyers there essentially. So, it's important to just have contingencies and not be all or nothing. You know, we don't always need the complete gap fill because we don't always get them. So, um, your target, uh, should be the full gap, but I do recommend taking partial partial
22:21 profits because the thing is, if you're in a gap and the sellers get exhausted, that creates a real a real potential for a uh, essentially a gap continuation where it partially filled and now it wants to use all of the shorts who are waiting for that full fill as like fuel to the fire. Sorry about that. uh fuel to the fire to to push out of the gap range and continue higher. So, uh with that in mind, let's talk about the next level. We're leveling you up here. You got the basics and now let's talk about a little bit more nuance. Like I said, these partial gap fills are a very very uh common thing too. Not as common as the other, but you'll see it a lot. So, it's important to know how to trade them. Like I said, that 50% rule is super important. So, often the trades
23:07 will bounce from the 50% fill of the gap. So, like I said, just mark a fib on the top of the candle where it started to gap from and then, you know, the bottom of the next day or the next candle where essentially there's that hollow space. And if you look, you'll see that right in the middle of that is a very very common place for uh for interaction. So, uh that's super key. Um and let's see what else. Uh gaps that hold those partial fill levels that like I said, they often signal strong momentum in the original direction. So, we can we can use this to color our basis or our bias for the trade overall. If we see the partial gap fill starting to play out or it's finding finding support in there, you can start looking long a lot with a lot higher confidence and ideally you've already locked in
23:54 some profit on the short. So, then you kind of like I said have this nice cushion for a real real high probability trade. Um, another thing is that there are multi-touch gap fills. So, some kind of stair step down and they dig dig in a little bit to the gap. they come up, they dig in a little deeper. And often I find these uh these lead to really explosive moves in the original gap direction because you're essentially getting like multiple chances for bulls to uh to reload and they're like, "Oh, I just keep getting a little bit better of a deal, but I still trust this." So when you see that, um very often you can look for those extensions. Um what else we got? So failed gaps, they really do provide I'd say probably some of the highest probability reversal setups. So these
24:39 are probably some of my favorites. If I see if I see a stock that I like gap up, I'm really hoping that we get one of these because then I get a really good discount on this uh this this very strong move that caused the gap up. And you know, you're going to have a lot of people who are just saying every gap fills, right? And so that provides a lot of fuel for the fire, like I said, and you can get some real nice squeezes out of these. So, on to the spiciest of the gaps, we got earnings. And you can kind of classify these as uh news as well. Basically, any fundamental change in the in the uh in the underlying. So, when you get you get some really nice earnings, uh often a beat plus a raise will will lead to a gap breakout. But if
25:26 you don't get the beat plus array uh arrays sometimes sometimes they the earnings gaps fill and that's really important to know. So uh they they have about 60 to 70% fill rate I would say and um that that's worth noting because it is it is higher than the technical gap ups. So um that you just see a lot of kind of uh mean reversion and ironing ironing out of the tape before you get the continuation. So, uh, there's a few things that you should consider for these. If you, if you are playing an earnings gap up, the first thing that's really important is that if you're playing with options, you have to be aware of IV crush. So, very commonly, you'll see IV spike on the initial move up maybe 20 to 40% on average, and then it'll just it'll just crash, right? 30
26:11 to 60%. So, you can play option strategies targeting this. Uh, personally, I don't like to mess with options around earnings too much because it's just uh a little bit of a crapshoot. it can be kind of kind of wild uh wild out there. So, just just keep in mind and know what kind of trader you are and what best suits your trading style. Um I think the most important thing for for gauging whether an earnings gap is going to fill or continue in the initial direction is you got you got to bring in the macro. You got to put put on your macro cap or your fundamentals cap and you got to think about the bigger picture. So like what has changed in the story of this stock? Is this um is this meaningful? Is this something that the market would just use for a little pop and then probably probably nothing major has changed? So, like I said, uh a beat plus a raise is a
26:58 great sign that there is a decent chance of continuation, but otherwise uh you should be you should be expecting most gaps to be tested um on on these. So, um, the other thing that's really key, and like we mentioned with the Zcaler trade, is that you can look for the, uh, the sympathy gaps. When a leader in a sector makes a really strong move and posts impressive earnings, you'll see across the whole sector, um, people basically looking to play catch-up. And they say, "Oh, Zcaler's ripping. I bet I can buy Octa or Crowd, uh, or what else, you know, any of those types of names. Uh, PaloAlto, stuff like that." And essentially they can make up for missing this move by playing another name. And then they get the higher reliability of saying, well, if their earnings were
27:43 good, there's a high chance that these other names earnings are going to be good, too. And you have the algorithmic basketing where, you know, they tend to move together overall, you know. So, you get these uh nice h high probability setups there, too. So, on to uh on to gap continuation strategies. We just talked about some gap fill strategies where we gap up and then you're looking for to fade that. But let's talk about how to how to look for setups where they gap up and you want to go you want to go long. You want to slam it. You think we're going to the moon, right? So, let's hone in on that a little bit. We got a few types. So, runaways are the first. And the runaway gaps um they tr they signal um they signal continuation and acceleration. So they occur in the
28:29 middle of a of a strong trend and it's just like pedal to the metal baby. So like think about Nvidia like not at the bottom after it gapped up and flagged. Then it started gapping up, flagging, gapping up, flagging like I think three times or something. So you get these explosive moves where essentially the markets decided, hey, that that bottom was oversold. We're really going to run this up. We have the juice. And um so these these occur on moderate volume. So about like roughly 120 to 200% um it's you know this is an exact science but just collectively that's generally the kind of look you're uh you know volume profile you're looking for and that's because you don't want to see crazy high volume after we've already gapped up and flagged and gapped up. You
29:15 know if it's on crazy high volume there's a chance that it's an exhaustion move and that relatively poor structure underneath all those gaps could get rapidly filled. So, that's something you do got to watch out for. It's one of those things where you actually don't want to see crazy high volume. You want to see more than normal, but it's kind of that sweet spot, right? Just because, you know, we're in the middle of the move and uh you you don't want the high volume that often comes with a topping pattern, which we may have seen on Nvidia. So, that's uh something to keep in mind that I think is really important. And uh let's see what else. these uh these gaps are quite easy to to measure in terms of the projected targets and there's a few tools you can use to do that. The first is just the the classic Bulcowski measured move. If
30:01 you caught my old webinar on that, you know how much I love these because it's so simple, right? You take the you take the range or in this case the gap distance and then you just double it and it just works. Not always, but it very often does does end up being the kind of next target for the impulse move from the gap. Another very big one, if it can't hit that two, very often it will it will turn around at the 1.6 extension from that range. So, yeah, I think FIBs are a super essential part of your toolkit for just about any trading strategy. But for these gaps, they're very useful for giving you very defined targets. Like I was saying before, I love these setups because they're not they they take a lot of the guesswork out, right? because the guesswork comes in playing the earnings before the gap, but we wait for the move and then we play the logical kind of uh reaction to
30:48 that move. So, as a mean reversion trader, I'm all about it. Um, as a reformed breakout trader, I like it because I can mean revert the initial move and then have a little fun and try to play the continuation if I think it is one of these continuation setups that aren't just going to fill in reverse. So, um, what else we got? Uh, runaway gaps. they they they occur in the midpoint of the move like I talked about and uh multiple runaway gaps in sequence they they signal that extremely strong momentum like we did see an Nvidia off the bottom. So that's why I'm very very I keep talking about it because it's very interesting to me that this gap is showing different characteristics than the other. So we'll we'll have to see if that plays out and we'll touch on it next week too when we wrap up the gap uh the gap series and we'll see we'll see
31:34 how these ideas kind of played out in action. So um on these moves if you do correctly identify it I think that you can uh you can size up a little bit because they generally offer really excellent riskreward because uh you can you can just catch these kind of big catchup moves where it's like okay this thing is juiced and you know it could be for X Y and Z uh you know it it's it's just a very common thing that you'll get these these very very big moves because I mean if it's strong enough to gap out or break out gap, you know, flag and keep going and then it just wants to keep doing it. It's really signaling that the market is hungry for this asset. So, just something to consider. I'm not saying, you know, full port anything, but just maybe, you know, 25% bigger
32:20 than your normal allocation, 50% bigger if you're if you're a cowboy, but just something to consider there. So, the news-driven gap continuations, I just combined earnings and, you know, like FOMC type days because they're they're essentially the same thing, right? There's a fundamental shift in in the projections of an asset going forward. So, the biggest one and the one that I love are the ERB beats plus raises because they they have that really high continuation rate. Um, whereas often earnings report gaps, they fade like I said 60 to 70% of the time. ones with really strong beats plus raises, they signal a fundamental shift in the uh well the fundamentals and uh those have a 70 to 80% chance of filling
33:07 there. So we got uh we got we got our um kind of what we're looking for in terms of the fundamentals and then uh here are some things to consider in terms of uh in terms of how to kind of gauge these. So sometimes uh a market's delayed reaction to news is kind of the best thing, right? You don't always want to see a really really strong hard gap up right out of the gate on these. It's really nice when you see a modest gap up and then it kind of starts flagging. Maybe it digs into that gap just a little bit, but you see that there's buyers accumulating there. And so then you can get these interesting candles where they scare people because on the daily stick it'll open up high and then it'll slowly carve into the gap and then
33:52 it'll it might close near the lows. And if it's on if it's on high volume that's scary. If it's a jagged move down, but if it's a gradual accumulation off of that initial move, those can give really nice opportunities because they can get you in at a very manageable level where you know where your risks are. you know, say you come down into the 50% of the gap, then you can you can say, "Okay, we got the news. It was good. The market's selling it off a little." But I'm kind of kind of calling BS there. I'm going to fade that because it's not a jagged move down. It's it's respecting levels, whether it respects the actual gap itself or whether it respects the 50% of the gap. Um, you know, that's all we can use all of the interactions at these key levels to kind of inform our bias. And
34:37 if it does seem to match this profile of a fundamental fundamental change that's bullish and um and the sellers aren't too aggressive, then you can you can play these moves, these pullbacks, these slow slow reactions, and very often the real move will happen in the rest of the week, the next day, two, three days. So keep an eye on that for sure. Um like I said uh before, look for the sector rotation opportunities, too. Maybe you don't feel comfortable playing the move because it's just too strong. Um, and you feel like you missed it. Well, see what the the next best companies in the sector are because they're going to move too. Um, and it can be really it can be free money honestly just saying, "Hey, this gapped up. I'm I'm going to buy some of this." You know, it's it's just straight up it can be that easy. Uh, but really remember the key here is
35:24 identifying the fundamental change. So, you got to have that strong beat. You got to have good guidance. you got to really really have have a positive change of outlook in the company going forward compared to what you had for it you know the day before. So that's where you get the really rapid repricing and these big moves. And um for these ones since uh you know the the ones we were talking about before the runaway gaps those are continuations of an an existing trend. These they can be they can be pretty risky. So, especially if you're trading into an earnings report, of course, size down, but just in general, you know, I think that these are the ones that you play with less size because if you're right, you get an explosive move, but uh you know, it's just uh not not quite as uh as reliable, I would
36:11 say. So, um these are the main these are the main categories that I wanted to talk about today. We have a lot of stuff to talk about going forward. We're going to get into a lot more granularity and a lot more chart examples. I'm going to show you how I trade all of these ones in detail next week, but I I felt like it was going to be just too much to throw at you all at once. And I want this to be something that we kind of we're building our knowledge together here, right? So, we're we're building the fundamentals, the ground floor here, and it's important to just know what to look for. And then you you're going to start throughout the week, you're going to start saying, "Oh, maybe this is this setup. Maybe this is this setup." When you see that, I want you guys to bring it back to me next week and we can talk about your examples, too. So, that's where the the big interaction is going to come into play. But in general, I just wanted to talk about today um how it's not just about filling gaps, right?
36:58 Most traders, they only know gap fills and they're like they're not really um aware that there are specific classifications for these other types of gaps, you know, and like I said, they they all need to be traded in different ways. We touched on it a little bit today, but next week we're going to really hone in and and I'm going to give you some actionable trading plans like, okay, here's a here's a chart. Here's my stop. Here's my level. This is exactly what I'm looking for. And we can look at some different ones too, like, okay, this one worked, this one didn't. What were the differences? What actually were the defining characteristics? Because I know it's kind of abstract right now, right? So, um, next week I'm really excited to really dive into that stuff. But yeah, it's not just about filling gaps. There's so many different types. And, uh, I think that, uh, gap continuations are some of my favorites because they provide larger profits. And
37:43 then the gap fills you can kind of use as more like base hits, right? So you can take the gap fills to play for those gap continuations. Like I mentioned, um the next key takeaway here is that gap size and market context are super key. So uh the behavior of a gap, it it really does uh it is really is dictated by the size and the context for it, right? So we talked about the different size of gaps and uh how they tend to play out because the statistics are very different depending on those. So yeah, like I said, micro gaps, they fill reliably, but they're not much profit. The larger gaps, they signal fundamental shifts and you can really hit home runs, but got to size smaller because they, you know, if they don't work, you don't want to get killed on a big gap up that fails. So, um, gap trading, I'd say,
38:31 requires really systemic both classification and risk management because, like I said, there's so many different, uh, types and they all react so differently that it's not a one-sizefits-all thing. And um there are defined levels, but you got to respect them, right? Because if a gap fails, it can start a big trend down. And if you're trying to expect a gap to fail and it fails the failure, then you can get really cooked and just have shorts squeeze you all the way up a a massive move. So you got to respect your stops and you got to you got to focus on identifying these different moves. Um yeah, it's uh it's interesting stuff for sure. I'm also seeing my my latest uh draft kept the default text there. So, apologies for that. But yeah, um these are these are kind of what I wanted to
39:17 leave you with here. And now I'd love to get into some questions here. Um because I I love trading these, so I want to hear I want to hear how you're feeling. So, I'm going to start going through the starred questions. Feel free to keep keep the questions coming here and we will uh we will take it from there. So, do I use automated trading strategies, Tactical Mobile? Um, so I employ very limited uh automated trading strategies because quite frankly, it's not my strong suit. I mean, I'm I'm I'm the guy who has trouble figuring out how to set up the stream. You know, I'm not super technically minded in that regard, but I am learning more. And, you know, I I think that uh you you get a ton out of
40:02 uh our our partner, Michael Nos. He has some really good stuff on automation. He is an absolute whiz. He does most of his trading by automation and he's killing it. So, I think he did have um have a webinar on automation just uh for our Discord event. We had a Discord event this Wednesday and so keep an eye out on our channel. I believe we'll be posting those. And yeah, this he's a he's a wealth of information on automation. So, I I won't I won't I won't pretend to be an expert in something I'm definitely not. when I got an expert sitting right next to me essentially. Definitely check his stuff out. All right, KK, are there examples that can be shown from prior trading days in order to really visualize these concepts? Yeah, absolutely. So, I can um
40:47 let me see if I can just pull up my charts right now actually and I can give you some quick examples. Bear with me while I switch tabs here. And I know I didn't have uh examples today just because there was a lot to cover and I um I'd be here all day. I I am going to have be basically doing a deep dive on full examples, a full full kind of workshop next week. I just wanted to lay the groundwork so I'm not uh not diving in the deep end here and uh overwhelming anybody. So, you should be able to see my charts now. Absolutely. So, real quick, let's just talk about a few of these gaps on the
41:33 way up and kind of relate them back to the concepts we talked about here. And I'm going to change this to a dark background for you to make it a little easier to see. Oh, actually, how about this? There we go. We got the team colors. We got the trade the pool colors. All right. So, Let's talk about some of these gaps. So, here, this one right here. Let me Oh, let me highlight my cursor. That's going to make it
42:19 easier. There we go. All right. So, this gap right here, what do you guys think that is? All right, I'll tell you what this one is, and then keep keep an eye out. We're going to go through these gaps, and I want you to try to think about what types they are based on the ones we talked about, but I'll I'll give you I'll give you the answer for this one. So, this is a breakaway gap, right? Because we were in a range and then it said, "All right, we're going to break out." And this is the start of a real move. This is a this is the start of something new, you know. So, we we gap up and then let's zoom in here a little bit more. We open here and we test some of the gap, but not all of the gap. So,
43:07 what we can do is we pop our fib there. And what you'll see if you zoom in, we gapped up and then we came back and we caught very cleanly right over the 50% fib. So essentially what the market was saying here was, okay, this was too much right off the bat. This was a little aggressive. You know, we we had stops to clear out over this candle, over this candle, over these bodies. We cleared all of those out, but let's not get too hasty. Let's not get carried away. We need to confirm this move. So the market pushes down into the gap to confirm it. And if it's going to confirm, what will it do? It'll stick at that 50% fib and then accelerate out. And that's exactly what we saw. So
43:53 that's a really good example of the breakaway gap which starts the move. All right. And then what's the next gap here? You got one right here. So let's let's put this in context. We break out. We're running up. What's the next type that we see? These continuation moves or the runaway gaps. Right? So, this is when we're deciding whether we're going to run away with it. Right? Because also, we just hit another key level on the other side. Right? Here is a gap fill just on a higher time frame. Right? We broke out and we surged up here and then we started slowing down a little bit because we were negotiating this gap fill. We filled this tape. We
44:39 we essentially healed the chart up to this point, which is great. And now it's like a decision time, right? We can either see a runaway gap and continuation or this could be like mission accomplished. We hit our target. Time to come back and test that breakout gap. So, this is a really key moment in the market. But what did we see? We saw another gap up. And again, it didn't get too ahead of itself. It it came up to this wick here, but then it it did close low. was in the gap, but it's um Oh, I'm sorry. I'm just noticing that on Discord I wasn't switched to this slide. So, let me change that for you guys,
45:24 too. There we go. That should be good. Uh Tim, let me know if it's not. But, so ju just to recap for you guys, uh yeah, the gap up here, this is the breakaway gap. Now, we filled this gap and we're seeing the runaway gaps. So just gap after gap. Remember these multiple gaps can signal real strength. And hey, what did we see? We saw some real strength, right? It's been a crazy couple of months. So um like I said, the volume on these breakaway gaps, they're nothing crazy or the runaway gaps, sorry. They're nothing crazy cuz uh it's it's if you see that massive spiking of volume, that could be a warning sign. That could be a red flag. So we have the breakout gap here. We have a runaway gap continuation. And then it's interesting because we start to see some real choppiness here. And you know, this is this is what you could consider
46:10 uh kind of kind of um I mean just a lot was happening overnight in this time here. A lot of a lot of announcements were happening after hours or there was a lot of important things happening with other countries responding to tariff news. So you would see these big imbalances. But each time you got one of these imbalances between the open and the close, what did it do? each and every time it came and it healed. So on on this gap, this one didn't heal. So that's notable, right? That's a runaway gap. But then this one here, we came back and we retested the levels that it traded out the previous day in that wick. This one, the same thing. It came up and healed up to the body of the candle. Same thing here. Healed up to the b body of the candle. Same thing here. Went there. And then it even went
46:55 up and retested this little imbalance. another gap up, came back and retested the wick of this one. So each of these days gave you a reliable small base hit win, right? Each of these days it was very high probability and you could have said, "Hey, I'm going to take a position and look for a retest of uh of the previous day's candle, whether it's the body or whether it's a wick. But either way, you you can very easily say, "Okay, the these are these are just base hits you can stack up while you're kind of gauging where the market's going." So, as we keep going here, this big gap up, another runaway gap, right? So, this is just showing, man, we are still so strong. We are still so strong. So, this this one was
47:42 on higher volume, but it wasn't crazy. Wasn't crazy. So, we don't really we're not really worried about exhaustion here, especially because what does it do intraday? It opens here. It comes back and it tests some of the gap. And where does it test? Tests a key level. It tests the swing high. And then there's an instant response. And it closes at the high of the day. So if you if you were just waiting for decision uh decision of direction out of this, I mean that close is all you really need to say, hey, I'm going to try long here. I'm going to swing along. And you get the instant reaction continuation up for quite a while. And uh yeah, so I think that this is a good example of not only a couple different types of gaps, but why I'm not bearish on the market yet. Why I think we still have room to go because quite frankly, we've seen no exhaustion. We've seen no exhaustion. We
48:28 just keep seeing these gap and goes, gap and goes. So, uh KK, thank you for your question. I think uh I think it was a definitely a good idea to go over some of these and uh next week, tune in because we'll we'll be doing a lot of examples. And that's my that's my favorite part to be honest. It's so fun playing with the charts. So, we're gonna we're gonna see what else we got. All right. Mr. Scott Thompson Tomlinson, sorry. I screwed myself big time today on that big gap down. Lost about 5Kish. Oh, man. Sorry to hear that. Got scared. Sold all my TQQ and I was hold that I was holding from the last news-driven event of tariffs being removed by the courts. Yeah. And so, this is I mean it's such a I'm I I I won't sugarcoat it. such a hard market to trade with uh with all of these uh news catalysts just happening constantly and I mean it's a
49:15 full-time job to keep up with it and let let alone trade it correctly because I I I would not I would not blame you. Let's look at the hourly chart here and see see what we can see from today's price action. All right. So, there's the Thursday candle. And let's mark it really quick. That's the first candle of Friday. And we'll hide that just for a second to watch this wick. So, the open, this was a really deceptive day because we came down, wicked up, and then it's like, okay, we're still back. We're back in business. We're all good. But when we were unable to push higher, it really
50:01 did flush out. What did it flush out to? This gap right here. So, it came down, it tested it, but the hourly candle closed back above it. So, this it's scary, but this candle would have me looking for a buy because what did we do? We tried to push higher on here. We couldn't. We're flagging. We fail. We sweep all of these stops. take all that liquidity that's called internal range liquidity. So you've got this range that we formed and yeah there's a reason why I wanted to use this tool. Look at the middle line. What do you guys see? So the middle of this range, the exact 50% is exactly aligned with that gap
50:47 where we marked in orange. And that is exactly where we would look for buyers to come in in any range. So, that's a very bullish sign in my book. But, man, if you're just watching short-term candles, Tom, uh, Scott, I do not blame you. Like, this was this was gnarly. This was gnarly. I I actually I had a bunch of administrative stuff to do. And I didn't trade the whole day. So, it's a rare rarity for me, but I'm just looking back like, yep, that that might have got me if I wasn't watching this. If I wasn't watching this. Not saying I would have caught this, but just in retrospect, it's easy to see, right? So, yeah, don't don't don't kick yourself too hard. It was a tough trading day. um you just just get back in there. But but it's always good to kind of reevaluate and see what what could I have done differently. And it to me it looks like once we failed and let's look at a
51:33 little closer and see how abrupt the cell was. So that's pretty mean because when you get this type of move and it doesn't actually sweep the stops, you kind of want to say, well, that showed a sign of strength, right? It held the range, you know, which is valid. And we did get a push off of that. And as you can see, we had that little gap that I think that was the target, right? It came back up to heal that after reaching down. Came back up and then it said, "Okay, this this this was all we needed right now. We don't have the strength to push higher. There's going to be uh there's going to be some uh some shake and bake here
52:20 because it is the last day of the month. I mean, you know, last trading day of the month. So, you're going to get a lot of um a lot of uh other factors like push and pull factors that you wouldn't see on just an average Friday, right? But, you know, even even normal Fridays, you can get a lot of that kind of framing of candles kind of window dressing as you might call it. So, it's uh it's it's tricky. This is a tricky trading day. And then we just come down, we have to flush and we have to renegotiate this this gap. But what did we do? We tap into there. And they said, "Man, this is what I've been waiting for. This is what I've been waiting for. Just give me this gap and I'll I'll send it." And they sure did. So, now we've swept all of the stops in this range. And it to me it looks like we are getting ready to to make another push up here. So that's
53:05 kind of what I'm seeing what I'm seeing just right off uh right off of today's price action. Let me scroll back and take a look at some more questions if we have any more. Gaps are like tacos. There are many different kinds and they all tasty when identified correctly. Mike, you're you're on it, man. You're on it. I like a good carne assada myself as well. All right. All right. So, we got a we got we got other mic chiming in. Yeah, he does have a cool name. You both do, and I'm with you guys. All right. Um, let's see what else do we got. You came to the right place, Sherry. We're going to be doing an even more in-depth one next week to finish
53:52 this uh this series up. So, thank you for tuning in. Mike saying the W pattern off 583 was key today. 583. Did we reach all the way down to 583? Yeah, just about. Didn't we? Yeah. No, I'm I'm seeing it. I'm seeing it. Yeah. So, seems to me like it has unfinished business up here now. And I mean, then we're so close to 600. I would really like a chance to short at 600. I don't know if they'll give it to me, but we shall see. We shall see. The fib magic is mind-blowing. Yeah, I'm I'm not a wizard, but I I had the exact same result. Like, you you
54:39 just I'm telling you, man, throw fibs on everything and you will see the coolest stuff. Like, let's just do a little thought experiment. I'm just going to go like this and we're going to find some cool fib stuff. Take the bottom of the range. take the top of the range, we draw it out. This wasn't the best example because we just gap straight through the uh the equilibrium. But I mean, that still is telling us something, right? We gap through the equilibrium and this is kind of like the this is the the big uh it's kind of like the bouncer, you know, it's like is he going to let you in or not? Are we going up and out of the range or not? If we show a real sh sign of strength through that mid level, quite high probability that we're going to break the top of the range here. And
55:24 as you can see, just boom, boom, boom, boom, boom. And um let's find another better example. I swear you cannot throw a fib on something and not glean some kind of information off of it. So, we're going to reverse this. All right, we have the top and the bottom of the range. We just surge up to equilibrium. There is a sell there though. Then we surge up again. And note this. This is interesting to me. So the bottom of the gap here, it's not like we tagged it just barely, just kissed it, and then showed any sellers. We said, boom, tiny cell. Boom. I still want more. I'm busting into this range now. And then, okay, bears are going to try, but they hold that 50%. So that's super key, right? So, now that we're over the
56:09 50% and expecting this move to eventually, you know, make back some of the some of the loss and trade in the upper half of this range, what we want to see is that beachball underwater effect every time it dips under the 50 fib. So, we saw here and we see it again here and just off to the races there. But yeah, the FIBs that you can see how how very clearly these levels are are respected to some degree or another, you know. So, I highly highly recommend throwing these on your charts. And just in case anybody missed my FIBS webinar, which I I'd recommend you go watch. I think it's pretty good. But I'll give you a real quick rundown of my fibs here and what they're useful for. So, we talked about the 50. That's the real important one. And
56:56 let's do this so you can see them more clearly. So 50 super key obviously the zero and the one you got to have them for a range right and so we're marking the top the bottom the middle of the range and then what we're marking with these yellow ones is the golden pocket. This is like the sweet spot. This is the sweet spot here. So, uh, essentially if you have a range from high to low, you would expect this area to show significant interest and it's often a chance for reversal. Let me put that on a chart and show you what I'm talking
57:43 about. This a good example. All right. So, we have There we go. The high of the range, the low of the range. So, this move plays out and then you see this buying occurring. Okay? So, if you're bearish overall, you're expecting the bottom of this range to break before the top of this range breaks, right? You're expecting continuation downwards. Where is the best place to re-enter your short? Say you caught this move and you said, "Boom. Okay, that's big buyers. I got to get out. Something something happened, you know, like that was significant. That was a change of character, right? So, the range has been formed. I'm out of my short. It was a nice move, but I want to get back in. Well, we look for the pullback into this
58:29 golden pocket. And that's the 62 fib and the 78 fib. And that provides a very very nice area for markets to retrace as they digest this range before continuing lower. So this one was a little tricky because you did get the continuation lower by like a tick. So if you took this trade, you're you're you're doing great, but then it forms a new range or it's it's I mean it's essentially still the same range, right? You can nudge this down just a p a penny or two, but you get another chance to buy it in this or I'm sorry to short it in this golden pocket. And to kind of bring all our ideas together here. What
59:16 was another reason why you might reshort it there? Anybody? The gap was tested. Not only that, but look at this, guys. We're doing it live. I didn't, this isn't a planned example, but I bet you anything if I put the fib here, look at that precision. And I'll zoom in for you guys just as a proof of concept here. When we measure this gap and extrapolate it outwards here, look where it retested. The exact middle of the gap is the exact place where sellers came back in. So those midpoints of gaps are super crucial. And this is a perfect example. Like I said, throw fibs on your chart. You'll see this stuff will jump out at
1:00:01 you. You'll start seeing fibs everywhere. I'm telling you, it's cool stuff. So, um the other lines on my fib are essentially just uh this on the other side, right? So, it's just dividing a range and this is kind of the average pullback area before continuation. And you know, this is just saying the same thing on the other side essentially same kind of range. And the last thing about my fibs are I have extensions. So, I have the 1.68 extension and the two extension. And I can show you how those work real quick. So, say you're trading this range here and you get an extension. All right. Bad example. It actually didn't get to that to that level. Uh, very often you will see the
1:00:47 1.6 fib get tested. Still nothing. Let's clean this up. I'll find one for you. So, we have the low, we have the high, and what happens when we hit the six fib? Delete this line. So, we're breaking out of this range. Where's the target? The 1.6. 6 fib. It takes a while, but it does get there. And that is when one of the first significant sells really occurs. So,
1:01:33 there's almost always going to be a reaction at this level. So, if you're playing a range breakout and you get this 1.6 handle, take a good chunk off, even if it's going to continue up to the two, which it actually didn't in this case. And that ended up uh, you know,
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