How to Scan/Screener Level 1, 2, and 3 Gaps Pre-Market
What is a gap?
A gap is simply a stock that has changed in price from yesterday‘s close to today’s open. I would say most stocks gap every single day even if it’s only a penny. More stocks gap every single day even if it’s only a penny, the problem is not all of those gaps are what we call compelling or meaningful all right. We’re looking for stocks that show shock value or create a void. Gaps are really important for intraday traders it gives us an edge. But, one of the really important parts of the gaps is if they’re really good gaps, level one gap! most of the time not always, the most of the time there’s gonna be institutional money in it and the stocks going to be on their own page. Now that’s a gap!. You’re just riding the tail of the whale that’s all you do. You want the big banks to be right in front of you paving the way and plowing either way for you. It’s like Moses parting the Red Sea and they’re usually on their own page – JW
I am a big believer and a big fan of gaps…. why? Good question.
Because they give us an edge that really nothing else in the market can give us
I am a huge gap trader. I trade gaps with relative strength and pre-market charts that’s pretty much how I trade.
There’s a lot of reasons a stock can gap. We don’t really care
Most of the time it’s news related. Here are a couple of examples
• FDA drug approval or upgrade or downgrade.
• Warren Buffett buys $5 billion worth of Goldman Sachs.
• The CEO resigns
• It could be an earnings report….. usually earnings is the big one. I don’t care. The only time I care is when a stock is an all-cash buyer that is the only time. We don’t care why the stocks are gapping. We just care that it is.
Finding a gap is easy since there is a lot of gaps that gap every single day. There is not a day a gap doesn’t gap. For premarket you need to look for stocks with high volume. Why? Because there is institutional money behind it. Mean the banks are buying. When a gap gaps up, look at how much it gaped up. If the stock gaped up to excessively then that should tell you it’s too risky because it might ruin the reward to risk.
If a stock gaps and its gapping to support or resistance or maybe into void then you might want to keep a closer look at it and wait for a pattern. Do not enter the trade yet
We need to have our entry, stop loss, and target area already planned out before jumping in a trade.
If a pattern does not form then maybe you can buy at level 2 uptrend…. The key point on this is knowing if your on a stage 2 uptrend stage /support area /or a double bottom retest.
Their two different types of gaps.
Pro-Igniting and a Novice Ending.
Pro igniting gap:
– They change the long-term trend/direction of the stock. By gapping against the current trend. BTW, some pro Igniting gaps can gap with the current no extended trend.
Novice ending gap:
– They change the current long-term direction of the stock. They do so by gapping with the current trend which will make it extended and change the trend’s direction.
Level One Gaps
Key traits on Level One Gaps:
– Gaps over red or more wide range bars which are around 3% to 5%
– The gap gaps over 2 pivots or consolidation
– The gap gaps just barely to clear the pivot or the consolidation
– The gap gaps into a void where there is room to move higher
Level Two Gaps
Key traits on level Two Gaps:
– The gap gaps over an average red bar / green bar
– The gap gaps over 1 pivot or more / a consolidation a well
– The gap gaps to clear pivot/consolidation but more than expected
– The gap gaps into the void with a room to move higher
Level Three Gaps
Key traits on Level Three Gaps:
– The gap gaps from a green bar
– The gap gaps 1 pivot /consolidation
– The gap gaps tremendously so it ruins the reward to risk
– Only gaps too small void area. Not a lot of room for the stock to move and make a profit.
Tips on Gaps
– When you trade aggressively. Only do so with level one gaps and always make sure to use your Entry/Stop loss/Target and share size appropriately. The goal is to match the proper entry with the gap level so we can improve your accuracy.
– Not all stocks gapping up are bullish.
– Not all stocks gapping down bearish.
– Good news on a stock does not mean a stock will move up higher or come down in price.
– Level one Gap you can enter immediately.
– Level Two Gaps you need to wait 5 min before entering the trade.
– Level Three Gaps you need to hold off a bit and wait for 15 to 20 min after the market has opened.
Steps On Scanning / Screener
What is a scanner / screener ?
A stock screener is a software designed to search for stocks using criteria provided by the user. … Scanners are designed for constant monitoring, using real-time stock data, for traders that want to information as it happens. Screeners are designed for traders who are not into trading on at-the-moment information.
What are the best time frames for gaps ?
There’s a great quote by Richard Wyckoff –
“Today’s market behavior is significant only when it’s compared to what the market did yesterday last week last month even last year there are no pre-determined never fail levels weather market always changes everything the market does today must be compared to what it did before.”
That basically defines tactical trading in a nutshell. Remember past price action to hopefully predict future price movement.
Our goal at Carjbe is simple… educate you guys on proper technical patterns. We need a proper mental approach to the business. There’s a lot of different ways to succeed.
we’re gonna examine a lot of those different ways throughout this blog.
you’re always learning to look to get better
You’re going to find your first year or two in this business in a very steep learning curve and then the learning curve settles down and that’s like anything you do.
You pick up a brand new sport the first year you learn a ton and then you slowly get better
The first year you quickly get better. In the second-year, you slowly get better.
One of my main goals is to teach you guys or gals just how important money and trade management is.
Psychology and money management… without them you won’t be here next year
Again…. You will not be here next year.
There’s too much craziness in this industry. When you go to other trading firms and you google trading, there’s way too much confusion and craziness on the charts alone. They have so many indicators that you simply can’t read the chart. Charts are great…. Charts are wonderful
The chart patterns are much less important than psychology, money management, trade management, and market experience.
So I want you to pay attention guys to what I’m going through as I go through this why?
I have been through… not gonna say every cause everybody’s always learning. I’ve been through most of the emotions that you’re going to go through.
Trading has real emotions
It can make you have some worst days were your frustrated but that’s real trading
To understand psychology, money management, trade management is very very important…more important than the charts. How about that? let it settle in your brain. Remember ( Psychology, money management, trade management) is what you need to keep your account alive year after year.
Swing, Intraday and Day Trading
We’re gonna talk about time frames and styles
of basic candlesticks
the market stages…. very important because it’s not just market stages but they’re also stocks stages I want to talk about the 3 trends uptrend downtrend and sideways trend.
Generally, people that trade in the middle of the trading day from 9 AM to 4 PM usually call day traders. That’s the general intro day traders. Some day traders are also called Scalpers Micro Scalpers
Separate daytraders from scalpers because daytraders will trade to 3,4 and 5 hours a day. Scalpers would likely trade an hour or two a day now there are exceptions I know some scalpers trade all day they’re just in and out of a lot of trades.
If you trade from 9 to 4 …your a day trader, intraday trader, and scalper
This is an income-producing style. You’re not going to get rich scalping one and five-minute charts. You’re not going to make $5 million a year or $3 million a year scalping one-minute charts. It can’t be done well…. it can… but, you get the point… it can be done. This is very hard because it’s just simply not enough liquidity and the moves are not big enough to do that but, that doesn’t mean you can’t make a healthy six-figure of your income, by being a scalper or a day trader you can. Longer-term traders, Swing traders, and core traders consider this wealth building.
Realistically speaking you should be doing BOTH! in the beginning, I recommend you choose one style. Choose one style in the beginning and master it but I look at core trading as in… what more in what way a fundamental person would consider long-term investing…. you’re not touching these trades very often, you’re more like on monthly charts.
There’s one more last category that you’ll read about and that is called intraday swing trade. This is a combination of both.
-Long term is a core trader
-Short-term is an intraday trader if you want to separate them.
What kind of trader are you?
So if you’re trading one minute, two minutes, five minutes, 15-minute chart your gonna be an intraday trader
If you’re trading 60 minutes, daily chart where you’re holding a stock for 3 to 5 days or 2 to 4 days you’re a swing trader.
If you’re holding a stock for a month at a time for instance three months at a time then your a core trader.
If you are typically using weekly charts and monthly charts then your core trader.
If you’re on 60-minute charts and daily charts those are entry time frames.
If you’re entering on a 60, weekly chart then you would consider yourself a core trader.
if you’re entering on a 60-minute chart you’re a swing trader.
Improve Your Investment Portfolio
If you simply cant sit in front of your computer, mobile phone or just dont have time to watch the market all day. Check This out
– 3-8 stock trades every Sunday Per Week for a month for a total of 4
Emails or SMS…….whichever you prefer.
–Entry Price for the stock (which is where its the best price to buy a stock… BY THAT we look into a key point where a stock will change direction by doing what is called an ‘MTFA‘)
–Stop Loss for the stock… (Which is when to exit a stock IF it drops below a certain price. This will help you PROTECT YOUR investment portfolio)
–The Target Area for the stock (which will be when to exit the trade when the Target Price has been reached.)
– Cancel Anytime NO Long Term Contract