Trading the Opening Gap – A High Probability Trade to Make Money

The opening gap trade is a high probability way to make money over time. What is this trading strategy and how do you trade it?

Learn more about this excellent trading method in this article.

What is the opening gap?

An opening gap is created by trading activity occurring once the market has closed on one day and before it opens on the next.

High trading volumes and activities are often driven by news events and after hours trading statements by market leading companies.

When after hours trading drives the share prices up, today's open will be above yesterdays close creating a gap up. The same applies if there is a sustained burst of selling after hours, which creates a gap down.

Why the opening gap is a high probability trade

This is a high probability trade because statistically the gap is filled around 70% of the time during that trading day.

This means that when a gap down occurs, there is a 70% chance that buyers will step in and drive the price upwards to meet yesterdays closing price, and often beyond.

The same applies to a gap up. Sellers tend to predominate when the market opens and try and drive the price down to fill the gap.

This price action is called fading that gap and creates an excellent opportunity to make money with a high probability trading method.

Why this is ideal for day trading

With a high probability of gap fill occurring during the trading session, the opening gap strategy is ideal for day traders. Often the gap will be filled within an hour or two of the start of the session so as long as the gap is significantly large, traders can make some good profits early in their day.