Trading a “Gap and Run” strategy is one of the most powerful day trading strategies a professional trader can implement.
If done right it can be so effective that you can finish your day after 30-60 minutes of trading!
And with this short and simple strategy you can return massive returns FAST!
It starts with strict discipline!
Sure, every now and then you might get lucky and pick the right stock and the right direction, but that’s gambling not trading!
Finding the right stocks each and every day takes grit as you hunt the markets scouring for that perfect trade.
Every day I search for the same setup and never take a shortcut with my research.
Repetition is what makes us so good at these strategies and it is discipline that keeps us profitable.
Learning a strategy for day trading gaps consistently is critical for success in the markets.
In this tutorial, you will learn how to identify, interpret, and trade the Gap and Go pattern the right way to lock in massive 70% gains in a single day!
The Gap and Run strategy has 2 key parts…the Gap and the Run.
What does the Gap and Run strategy break down to?
An overnight gap measures the difference between yesterday’s market closing price and today’s opening price.
Unlike other strategies being early is a plus in this strategy.
This will allow you to be thoroughly prepared once the official market open arrives.
Some of the most popular scanning logic includes today’s pre-market stock prices but does not include yesterday’s after-market stock prices. Be sure to understand how your broker calculates the gap to avoid confusion.
After the gap is identified and the market opens it’s a mad rush as traders are now piling into their favorite stocks pushing it higher.
Because volatility is higher than average it is important to monitor prices closely as the run could happen in the moment you blink.
Pro tip: It’s best to use mental stops here instead of physical stops to keep you from losing your position in the high volatility.
This is an advanced technique and puts the trader at higher risk of significant losses.
Many strategies that traders utilize in the marketplace require continued practice and constant trading in order to master the techniques to become profitable.
Like every trading strategy… the Gap and Run has its advantages and disadvantages.
Remember, there is no “holy grail” strategy that works 100% of the time.
Sound like something you want to trade yet?
Let’s take a look at a live trade that landed a whopping 70% returns!
Now this is where things really get interesting.
Trading stocks don’t let you have explosive gains like trading options would.
So, let’s see what happens when we combine a stock trading strategy and trade options on it instead.
This will break down into 4 steps for this trade:
So this is what I spotted that led up to this trade.
The SPY’s on 1/15/2019… there was significant buying and increased volume at the end of day.
And this caught my eye!
Take note of the highlighted portions of the chart near the open and close.
The volume at the end of the day was significantly larger than the volume at the beginning of the day.
This signaled a potential for a strong post market leading into a strong pre market and a gap to form.
Which is exactly what happened!
Next… In the overnight hours a Bull Flag was spotted forming in the SPY’s.
This is a great bullish continuation signal and also helps give a support level for which the SPY’s should hold at.
On a 15 minute chart in the premarket trading, the 10 EMA line is above the 20 EMA line.
When a shorter term EMA is above a longer term EMA, it signals to the trader significant strength in the stock.
For a trader this is a sign that the stock has a high likelihood to continue with the strong trend.
A trader has many different ways to place a trade on a stock, typically choosing between stocks and options.
In this case – options are close to expiration and we expect the movement to be sudden. So it makes the most sense to leverage the options market.
Here was the trading plan issued to the trading team was:
“Trade of The Day is SPY January 21 330 Calls @ 0.90
Buy to open followed by sell to close CALL option move
Target price: $0.99 or hold until close.” – Ben at 9:41am
If the overnight support formed by the Bull Flag is breached, it is recommended to exit the trade.
In order to remain in this trade the SPY must remain trading above the technical support level of 329.35 set by the Bull Flag in the pre-market.
If the SPY’s break through resistance it is best to hold all calls until EOD to ride the run.
Additional technical resistance levels: 329.51, 329.65, 329.73.
Additional technical support levels: 329.35, 329.15, 329.06.
If the SPY’s break 329.35 that is a breach of the technical support level and should be the stop exit level for this trade.
For this trade the exit is fairly straightforward.
Looking at the resistance that was breached early in the trading day and price holding strength above the support, it seems that it’s best to hold the stock until the close.
So… Overall, this trade went exactly as planned!
One thing that could have been done differently was to trade the stock at the close the day prior but that’s monday morning quarterbacking the trade.
Let’s break down the trade by looking at the stock charts.
In this chart, the bottom of the Bull Flag is the stop level on this trade.
Since we are looking for continuation to the upside, a break of this level signals a failed pattern and therefore, invalidates the trade.
With trying to get the best bang on this trade the options were traded.
Now looking at the price of the options.
The options were on fire from the close of day prior.
It would have paid off big if we took the trade at the close of the prior day.
But that’s ok since this trading strategy allows us to get in after the gap.
In this trade we were able to enter at $0.90 and adhering to the trading plan, we were able to exit this trade at the end of day at $1.52!
That’s a massive 70% in a single day on those options!
The Gap and Run strategy – the name explains it all.
By following the simple strategy outlined above, you won’t be left out of the action again! There is no reason you can’t bring in huge gains even after the market gaps higher.
Finding the right stocks each and every day takes grit as you hunt the markets looking for that perfect trade.
Every day I search for the same setup and never take a shortcut with my research, and neither should you!
It’s important to remember that repetition is what makes us so good at these strategies…and it is discipline that keeps us profitable.
Have you ever heard of Uber (UBER) and Lyft (LYFT)?
I know, I know. You’re probably thinking, “Umm… duh… of course we’ve heard of them, Ben!”
Uber alone has over 110 million customers worldwide.
But here’s another question for you…
Have you ever heard of YayYo (YAYO)?
Perhaps you haven’t, but I’ll bet you $500 and my best watch that the Uber or Lyft driver you rode with last week has.
That’s because this company — which just IPO’ed this past November — rents cars to rideshare drivers and even provides them with its proprietary insurance.
In an industry that currently adds a whopping 50,000 new drivers a month to keep up with the demand, many of them are starting without their own car.
So today, I want to share with you some of the company’s key fundamentals — including a rather suspicious referral commission structure — as well as, my strategy on how to trade them.
The Ridesharing industry is growing fast, and YayYo wants to grow fast with it.
Uber alone has added roughly 2 million drivers in the United States, and it doesn’t plan on stopping anytime soon.
YayYo may have IPOed at $4 per share and declined to just over $1 over the past two months, but the growing supply of new drivers without cars means that YayYo could have a lot of room to grow.
YayYo has ambitious goals and wants to be the number 1 provider of rental cars to drivers in the industry.
It hopes to accomplish this through its two subsidiaries — RideShare Rental, which provides a platform for the rental of cars, and Distinct Cars, which owns a fleet of vehicles available for rent.
But there’s one aspect of YayYo’s growth aspirations that has me raising an eyebrow…
I dug up one passage from the company prospectus that made me wonder if the whole thing is just one giant multi-level marketing (MLM) scheme…
“Drivers renting cars from our Rideshare Platform can join the Ambassador program and refer other potential drivers and prospective customers to rent from the Rideshare Platform, providing our customers with additional income opportunities. The Company has designed and deployed a referral commissions team matrix that allows for both depth and breadth of commissionable referrals for the participating driver. As participating drivers add additional referred drivers to their down line, they progress in gaining additional levels of commission rewards. Eventually they are able to earn a free vehicle rental from Rideshare as a premium reward.”
If referral commission structures make you cringe and recall the last time you were pitched on a bottle of snake oil, you’re not alone.
Not only that, I recently learned that the YayYo’s CEO, Ramy El-Batrawi, was charged by the SEC for share price manipulation of Genesis Intermedia, his dot-com era company.
So while I’m certainly not eager to jump into a long term buy-and-hold situation with YayYo, I am however interested to eye some potential short-term profits on the ways things shake out.
Let’s take a look at a potential setup I’m eyeing today…
When you look at the daily chart in YAYO above, you’ll notice this stock got destroyed… but it’s found some support just above the $1 level. Of course, in order for YAYO to continue listing on Nasdaq, it’ll need to stay above that price.
For the most part, I don’t trade micro-cap IPOs like YAYO, but this one is interesting because it does have just around 10M shares floating – that means if demand kicks up for this stock, I wouldn’t be surprised if it gets back to its IPO price.
However, I’m going to remain patient and be very careful with this name… and if I do decide to trade it, it’ll be a really quick trade.
I’ll be keeping my IPO Payday subscribers in the loop.
John Lee Dumas is the host of Entrepreneurs on Fire, an award-winning podcast.
In the last 7 years, he’s interviewed over 2,300 inspiring and successful entrepreneurs such as Tony Robbins, Seth Godin, Gary Vaynerchuk, Barbara Corcoran, and Tim Ferriss.
This week I interviewed John Lee to learn how he grew the podcast from an idea into 1 million-plus listens a month… and a thriving seven-figure business.
What came across clearly to me while speaking with John Lee is that his success hails from two main objectives;
When you’re consistent “something great” can occur.
As Bruce Lee said, “I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”
John Lee Dumas is a clear example of someone doing something once, 10,000 times.
And all those little bits of something add up and you soon start to crush bigger and bigger goals.
Just like John Lee Dumas did… does… every single day.