The Art of Gap Trading

What are the benefits of day trading? Well, if you are stuck in a boring cubicle job, learning money-making skills to escape and control your financial destiny is one of the main benefits. What starts you out on that path is learning a relatively basic technique like gap trading and knowing which penny stocks to watch.

Later on, you will learn more about how trading gappers can be an excellent introduction to the world of day trading. But what really is needed to be an excellent day trader is the ability to manage risk while making lots of trades each day, control your overhead and personal spending so that day trading profits can really make a difference and learning the strategies to finding the best stocks to trade.

One of those basic strategies is trading gappers. Basically, a gapper is a stock whose price is trending up in the morning, over the closing price at the end of the previous trading day. Now, not all gap stocks are created equal. What you want to look for is the float, an understanding of the potential breakout times throughout the day and what the catalyst might be for the gap.

The float is the number of shares available for purchase out on the open market. You want a float of a million shares or under, so that the chances of an entire float being trading for that stock in on day are high. That means there is a likelihood of a run on that stock. Which means you get to profit from that run, if you play your cards right.

The catalyst could be any piece of breaking news about the company, perhaps the earnings report or the release of a new products. That type of news could get the pre-market trading of that particular stock going, raising to the price to at least a 4% gap, meaning 4% higher at the opening bell than it was as at the close of trading the day before.

After you identify your gappers, you need to formulate a plan of action. You want to understand at exactly which minute candle to buy the stock and when you are going to sell it. The terms like candle, pre-market flags and opening range breakouts are hard to keep track of, which is why you want to find a reputable site to get your day trading education.

If you enroll at Warrior Trading, you will get a chance to learn the best positions to take in a potential gapper and other strategies for really making money as a day trader.

To learn more about trading strategies in general and gap & go trading specifically, follow Warrior Trading on Twitter.

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