In this episode, we're going to do a complete breakdown of the Gap and Go strategy. A gap occurs when the stock opens significantly higher or lower than the previous day, and this usually happens because of breaking news when we are trading stocks that are gapping. Generally what we're expecting is some type of volatility if a stock is gapping up depending on the quality of the headline. what I'm typically looking for is continuation, which is why this strategy is called Gap and Go.

Today we had a perfect case study that I'm going to use to teach you how I trade this strategy now. I'll say a few years ago something happened that changed the way this strategy works and it does not work the same as it did before this event and I can pinpoint it to the specific day. I will be sharing that event with you during this episode, so let's go ahead and jump in. All right.

So we're on screen share and you probably see a lot going on. So let me start by getting you a little excited here and showing you my P&l for the day. I Finished the morning up $665 41 trading the Gap Ando strategy of course I'll say As always, my results are not typical, but this is a strategy that I have been trading for years and that Traders all around the world have been trading for long before I even started trading. This is a universal pattern that works in probably every Market.

It works in crypto in Forex in Futures and can certainly trade it in stock as I do if we zoom in right here, we're looking at oops, I'm over. On this side, we're looking at the stock chart. So this is the actual stock chart of the stock I traded this morning and this will be the case study that we use. Now you'll have some questions naturally about where I got in, where I got out, how I found this stock, how I knew it was worth trading, where I traded it and I'm going to answer all of those questions and more as we go through this episode.

But I Think high level. Let's talk about what a gap is. So to understand a gap, we've got to look at the daily chart. So what we're looking at here on this stock is a daily chart, which means each one of these candlesticks represents one day of time.

If you're not familiar with candlestick charts, I have another episode that you're welcome to check out that breaks them down in a lot of detail. But in summary, a Candlestick will communicate four pieces of information. So if we look at the Whiteboard right here, I'll draw a candlestick for you. We've got the open, the close, the high, and the low.

So these are the four pieces of information every Candlestick communicates. and based on the shape of the Candlestick, we understand Market sentiment. So the shape of a Candlestick is in fact a signal. For instance, if you saw a Candlestick that looked like this, you would know this is a red Candlestick because of the color.

That something bad has happened. This stock has dropped very quickly so that communicates Market sentiment. What about a candle Perhaps like this? That's kind of interesting that communicates something else. It shows that the low was way down here, but the stock ended up closing way up here.

So sometime during the candle it sold off and then came all the way back up to close at the top. That shows a good degree of strength and resilience. All right. So now that you've looked at just basic candlesticks, when I look at a Candlestick chart and I look at the daily chart.

This is where we'll find the gaps and so on. This particular stock today. this one's actually got quite a story to it because as you can see, it has been selling off for a very long time and if we go back on the chart, we may even see, uh, some other gaps that might be a little bit easier to visualize. Let's see, there's a couple gaps over here that we can visualize.

This is when the stock was a bit more expensive. So I predict on this this day here, something happened all right. You see this day here with the big red candle, the big red candle, and the big red volume bar. Well on the previous day, right here the stock was trading at.

Let's see, let's get zoomed in right Here we were trading at. uh, well. let's see, this was pretty expensive. On this day, it was like $3,000 a share.

All right. So in any case, it's $3,000 a share. and then the next day it opens way up here at $5,600 a share. That is a gap.

All right. the stock closed here and opens way up there. And so this creates a gigantic Gap Overnight, the stock went up nearly 100% And So you might say, how in the world does that happen? The reason and the way a stock is able to M make a move like that is because of almost always there's some type of catalyst. So what? I look for in order to trade the Gap and go Strategy: Number One is news.

I Love seeing news because news is what creates this momentum. If it were not for the news, most likely, this stock wouldn't have done anything special. So all these other days, Nothing, nothing, nothing, nothing happens overnight. And then on this particular day, most likely after the market closed closed and before it opened the next morning at 9:30 there was a news headline.

The news headline was strong, strong enough. the stock went up nearly 100% But as the day went on, the candle closed red and the stock sold off a little bit. So today we had a similar, um, a similar situation. so we'll get reoriented down here.

So today we look at this, we get zoomed in here and what you'll notice is that yesterday this stock was trading at let's see it closed cled at $2.79 All right, $2.79 and today it hit a high of $881 Holy smokes, that's like 300% That is a huge move overnight from the close all the way to the high. Now it ended up opening as you can see the bottom of the green candle the open. So today we opened at 482 and then when the market opened we got this nice move and that's what we call the Gap and the go. So it gapped up and then it went.

it squeezed. Now something interesting happened. Uh with these Gap Ando stocks. Uh, it was around.

uh, Covid during the Pandemic. These stocks used to have news that would come out pre-market and really, the news might come out at 8:00 A.m 8:30 9:00 A.m. Could be clinical trial results FDA announcements Could any kind quarterly earnings things like that. We would have some type of news headline that would come out and then no one would really trade it until the market opened at 9:30 So if you've been actively trading for a while, you're probably aware of the fact that we have pre-market regular trading hours and then after hours.

So if you look at the Whiteboard the way this is split is 400 a.m. to 930 is pre-market so that's pre-market and then you have 9:30 to 4 p.m. which is regular trading hours and then you have 400 P.M to 8:00 p.m. which is after hours trading.

It's kind of funny because really, the Market's open at 400 am and it closes at 88m. I don't know exactly why it's distinguished in these sort of pre-market and after hours and then regular is just in this window because effectively, when I'm trading, uh, there's no difference when I'm executing my order I can trade premarket I could trade after hours or I could trade during regular hours. but I suppose this is kind of Legacy stuff from the old days when you know they would ring the bell and that was the official open of the market and even prior to Co. What would happen with a lot of these stocks is that they might have news that came out pre-market but nobody really traded pre-market There wasn't a lot of volume, there wasn't a lot of liquidity because there wasn't volume, it was hard to get in, it was hard to get out and so people would just wait for the opening.

And so what would happen is basically the Bell would ring and at that moment there' be a clamor and everyone would be trying to jump in these stocks at the same time. And so we would have these stocks that would be quoting higher prices than the previous day. So if the previous day, like the case of this stock here was 279, we might be showing a quote on the market of $4 But even though there's a quote of $4 there wasn't really a lot of volume. So no one really buys.

and then the bell rings and all of a sudden everyone starts buying and it goes right away. 4 to 425, 435 445 450, 460, 470 $480 $5 and it just keep it just squeezes right up at the open. That was the classic Gap and Go pattern because the Gap would start pre-market but there was no trading. The trading would really be the go would be at the open and then during Co things changed.

So what? CH what? and I I I distinctively I I Actually remember the day it changed, all right. So come with me back in time and let me share with you the story. All right. So we have a stock and we could look at the screen.

Share Again, it's a stock. Um M Much like this, it's a stock that's on our scans. Um, we'll back this out here. So I'm using these scanners as you can see over on um, the left side of my screen.

so let's see on the left side of my screen. I've got these uh, scanners up and these are searching for the stocks in the market that are moving higher right now. All right. So I'm looking for oops, I'm looking for these stocks that are moving higher and I've got this list and So usually what I'm doing is I'm looking at each one of these stocks I'm asking myself, okay, do I like this stock? do I like the setup uh, is this something I would be interested in trading So I'm looking specifically at this top gappers window the one in the bottom corner and this is listing all of the stocks that are gapping up pre-market and what I essentially do is I go through a checklist, ask myself whether or not I think this stock has the potential to be good for trading.

So if we go back here, we already said we're looking for gapping stocks, that number one have news Number Two I'm GNA generally be looking at the top two to three leading percentage gappers each day. The two leading gappers each day are what I'm going to focus on the top two or three because I want to be trading a stock that is super obvious that lots of other people are watching too. Now number three I Generally find that stocks uh, priced between 2 and 20 perform the best. So you'll notice today just for instance, that uh, two of the stocks on the top of the scanner are really cheap.

so this one was 4 cents a share right here. All right. So I'm not interested in that and the second one is A18, so it's a little too cheap. The third one is the one that I end up trading.

it gapped up 72% The stock ticker was Bdrx. the price is $5 a share. the float is quite low. It has news and and this was the one that I ended up trading.

So on this particular day back in, uh, probably it would have been 2020. it was probably um March uh no. February I would say February of 2020 I have the stock that I'm watching I know that I I like the setup I like the news, everything else and I have my order ready to go and it's about 928. So I'm waiting for the market to open to press the buy button and all of a sudden volume starts coming in and starts moving.

It starts squeezing and I'm like what's going on, people aren't waiting and I I clicked the buy button and all of a sudden I was in the trade and I'm in pre-market and I'm I'm like I'm I'm You know I'm in this trade at 929 The Market hasn't officially opened yet, but it didn't really matter. So all of a sudden I'm in the trade and then the bell rings and it keeps going higher and the rest of that week that kept happen happing and it was like 9927 926, 925, 920, 915 910. It basically what was happening was as essentially Traders were trying to jump in before the Gap and the go they they knew of this pattern that was happening. and so rather than wait for the market to open, Traders were just jumping in early to try to get ahead of that squeeze.

And so I started doing the same because I realized I'm missing the move. So I started getting in a little earlier, a little earlier, a little earlier. and then what ended up happening is basically the second news came out, the stock start squeezing Traders aren't waiting and so now it's it's and this is the way it is now. Today, years later is the moment the news comes out, the stock starts spiking and there's even algorithms.

And the these algorithms run by highfrequency. Traders Uh, institutional. Traders They co-locate servers at the exchanges, so when they get the news, they can execute orders instantaneously. I Mean they are trading the news like the moment it comes out.

So if we look back on the screen, share, what you'll see is that on this stock. Bdrx: there's this scanner at the uh, the top left of my of my window here and this produces alerts in real time. So each time I get this alert, the scanner, um, makes a beeping a sound and it's like a radar. It's telling me that a stock is moving right now in real time.

So Bdrx: Well, the news came out here this morning at uh, it was at 9:00 A.m. so it was at the top of the hour 9:00 A.m. There's been a couple headlines that replace the top three, but right at 9:00 A.M news came out and so by 9:01 and 202s, this was hitting a scanner at $355 a share and from there it went from 350 to 380 to 399 to 407 to 415 to 419 to 420 426, 439, 440, 460 And now it's hitting a second scanner and a third scanner. 477, 479, 480, 488, 490 Okay, this stock is moving quickly and now it's game time, right? The stock is moving.

We've got a candidate for a Gap and Go, and and in fact, what's kind of funny about this is that Gap and Go trading used to give you more time to prepare your watch list because you would look at a list of the top five or six stocks that were gapping up. You'd focus in on the top three three, the ones that you liked based on the price range and you had time to plan out what you're going to trade before the bell rang at 9:30 Now when we look at our Um whiteboard here, I'll add a couple more items. um to this. so number one is for The Gap and go strategy.

We like to see that the stock has news breaking news I like to trade stocks in the top two to 3% leading gappers and and I would also add here as a note um, minimum is 10% if a Stock's not up at least 10% I don't care about it so it's got to be up at least 10% All right. Uh, then we like to see stocks pric between 2 and 20. That's ideal. I Like to see that the stock has, um, let's see relative volume relative volume.

Oops, that's five times above average. And so what that means is that when we're looking at the daily chart of this stock, uh, well. there's a couple different things we could do. So number one, this is going to calculate the relative volume.

It's going to tell me right here. the relative volume is 900 so it's super high so it calculates it for me automatically. However, what I can also do is I can look at the chart and I can just look at yesterday's volume. Yesterday's volume on this stock literally was 12,000 shares.

You know how many shares it traded today? Over 30 million shares. Over 30 million shares today. That's over $150 Million worth of stock that trade at hands today. And yesterday, it was basically nothing.

It was like $25,000 So how does it go and do that overnight? Obviously, Well, it wasn't really overnight, but it was as soon as the news broke at the top of the hour at 9:00 am.. Okay, so uh, so I can see very clearly that the volume today is substantially higher. A word of caution, if you try to apply Gap and go trading to a stock that's only up two 2 or 3% maybe like I don't know. Facebook Meta or Google or Netflix you will most likely be disappointed.

and you will not see that big go at the open. What we ultimately are looking at is an imbalance between supply and demand. So number Five is a float of under 20 million shares? That's ideal and this, this really is my my list of what would qualify as a good Gap and Go setup. So if if it's a float of under 20 million shares, this right here excludes your Netflix um, your your, Google your apples all of these big stocks The Meta These are going to be excluded right in here because they all have much much larger floats.

So the float is the number of shares available to trade. When the company does its initial public offering, they're selling shares onto the open market, and from that point forward, that's the number of shares available to trade. But what a lot of companies do over over time is they'll sell more shares to raise more money. And while that dilutes the value of the company a little bit, it also allows the company to reinvest that money so the company can grow.

So if we look at a stock just for instance, like um, oh we well I'm not going to switch around right now. I'll just check down here. So like Amazon has a float of like 10 billion shares. Uh, I Can see that on this other window, Meta has a float of two billion shares.

Google has a float of six billion shares. billion. These are huge huge number numbers of shares. So this stock has a float of 6 uh, 693 th000 shares and what I actually did was I went over to this website uh which you don't need to go to.

but I I I I will usually check this and um I typed in Bdrx which is the stock ticker and I looked at their last um quarterly earnings. um and then I checked. Let's see, was it this one? I'm sure it was this one. Um, let me just check.

I think it. I'm pretty sure it was this one. So then I looked for shares and I saw. okay, they had um 5 million shares right here.

All right. So as of December 31st, Uh 2022, they had 5 million shares, 5.4 million shares available to trade. So that's that. confirms what the float is of this company.

Now this stock recently did what's called a reverse split. The reverse stock split is. um, it's a pattern that we notice a lot of these companies will do. If you see, this s right here, this is the stock split.

So this was a 25 no an 80 to1 stock split. Okay, so they did a big stock split right here. They did a stock split back here of 4:1 and they've had a history of doing these stock splits. Why are they doing these Stock splits.

What is this about? Well, there's a rule that these companies have to keep their stock price above $1 a share. and they can do that really one of two ways. They can either be a great stock that people want to buy or they can do a reverse split. and so if the stock goes down to 10 cents a share, they could do a 20 to1 reverse split and the next day it'll go to $2 a share.

But then what happens to those 10 million shares? Well if you own 10 million shares at 10 cents and then the stock goes to $2 you know it's a to one, You're up. You're up a ton so that doesn't work. So what they end up doing is they divide the float by the ratio of the split and now the stock is at $2 a share and you own 500,000 shares instead. 10 million, right? So now your value, your cost basis would be unchanged.

The amount of money you have is unchanged, but the price has gone up and the shares have gone down. So it's like a it's like a trade. Um, But what the effect is that it reduces the number of shares available to trade. So now back here.

This is what ends up pushing the float down and in order to see a really dramatic short squeeze. What has often happened. Uh, is a stock like this has sold off for a long time. It's been selling off, selling off, selling off and the float gets smaller and smaller.

and smaller and smaller because they do these reverse splits and then all of a sudden they come out with great news and the stock explodes. It goes from $2 to eight to 10 and I I Have seen stocks like this that are re recent reverse splits go from $2 to over $100 Basically like that now that P that window closed I Wasn't expecting it to close but um, hey, uh, in case you haven't noticed, this is um, my new book. It's titled How To Day Trade the Plain Truth and in this book I break down for you the 20 guard rails that I have implemented in my trading that have kept me from blowing up my account. I've been trading for a long time and this is a book for those of you guys that been wanting to learn a little bit more about the market.

I Really think that you'll enjoy it so I encourage you to check it out all right now I Wasn't planning on showing you this, but anyways, that page popped up and uh, let me go and switch back to the main screen. All right. So I've got this window back up. Okay, so at Bdrx this morning, Uh, so again gapping up.

it's got a float of less than a million shares which is a very low float and as soon as this stock hit the scanners I Pull it up I Saw that there was breaking news on it I Saw it's a pharmaceutical company. This is a sector that is very popular for. Gap Ando Traders Because pharmaceutical companies, uh, they can just be really volatile, they come out with great news. They're They've got a new treatment, a new drug, and all of a sudden the stock can really explode.

And this is especially true with these lower price stocks. So um, so even though Bdrx is didn't go to 50 or $100 a share, the fact that it was a recent reverse split made this even more interesting as a Gap and Go candidate. All right. So the first thing that happens here, the stock squeezes up right here and it hits a high of $4 a share.

So one of the challenges that a lot of Traders face today with Gap and Go trading is that it's a race to get in. That's what that's the. really the big change that happened a few years ago. We used to have a lot of time to kind of build our watch list and now when we're taking that Gap and go trade, it's like if the stock has just come out with breaking news.

the moment that news comes out, it's not even gapping, right? It's like the news comes out and then what ends up happening is those first algorithms end up executing orders and the stock starts moving higher. As it starts moving higher, it's going to hit those High a day momentum scanners. So boom boom boom it's hitting those scanners and that's how Traders like me are going to see it. And now we pull up the charts and now we're looking for that first entry.

So where do I get in on a gap and go trade? So today is a great case study of a Gap and Go and it shows us a number of different patterns that we can focus on. One of my favorite patterns that I'll show you here on the Whiteboard is, um, buying the first pullback. So what I look for in this pattern is the stock is going to start squeezing up right here. just like this basically.

so these are just candlesticks and each time it it makes a new high of day. it's going to be triggering an alert on my highay momentum scanners. All right. So if we go back over here to the Whiteboard or to the screen, share, um, our highay momentum scanner right here, each time a stock hits a new high, it's going to trigger this alert.

However, this scanner is not just looking for any old stock that's hitting a new high. this is looking specifically for stocks that already meet my criteria for being worth trading. I Don't need to get a notification every time a stock in the market makes a new high, only if it meets these criteria. which of course this stock did.

So it starts squeezing up. It's hitting these new highs, it's moving up here. and then what I like to do is I like to give it a chance to have a pullback. so the stock is first going to squeeze up.

It's going to make these new highs and then it's going to pull back. and what's Happening Here is Traders Who maybe were in lower in this area are taking a little bit of profit. Buying in this area honestly is very difficult. Not a lot of Traders are going to be fast enough to buy in this area I will sometimes do it, but even for me, you know there, there's just not a lot of time to take trades when it's moving this quickly.

Now if we look at this chart, we could see exactly that happening. So we see that the initial initial move, the stock squeezes up here from like 279, right? So the news came out and when the news came out right down here, you know the stock wasn't even gapping up. So it squeezes first up to about uh, $3 a share and then up to about 350. So it hits the half dollar.

It does a little micro pullback just for a second. it pops through 350 and goes up to $4 a share. All right. So that's a a full dollar a share.

And there are some traders who probably jumped on that very quickly as it was hitting the high dis scanners and took some profit. There are also probably some shorts who took a short something's popping up and you know they're shorting stocks popping up trying to catch a reversal. All right. So then you get a little profit taking and you get that red candle.

You get another candle here and then we get this. move higher and this pattern right here is called the first pullback. So if you look back on the Whiteboard typically what I'm looking for, this is like this is my favorite pattern to trade. So what I'm looking for on this pattern and I'm just going to make this just a little smaller here.

This green candle. Um, so what I like to see is high volume on the green candle. So this is actually the volume bar down here. So these are the volume bars high volume on the green candle and then I like to see lighter volume here on the red candles.

All right. So each one of these green candles would have had volume. So I'll just do one right here. um, another right here and another right there.

All right. And then these two red candles. We like to see that they have lighter volume. Now, if we look at the chart for this stock this morning, our case study um, I'll back out.

What you'll notice is that this didn't. Um, this didn't have the perfect profile and that was partly because. um, right here. This candle.

So this candle right here. Let's see. let me zoom in on it. There's a problem with that candle.

All right. So we're looking at this candle right down here. Let me get a drawing tool. so that candle right there.

There's a problem with that candle. The problem with that candle is the shape. All right. So when we have a candle, that doesn't matter if it's green or red.

In this case, it was green. It opens, it's squeezed up, and then it dropped back down and close. Basically flat. That's called a grave.

Stone Dogey an OM an OM Ominous name: An ominous name for a Candlestick here that is indicative of a battle going on behind the scenes. So what's happening here is the stock squeezed up but then flushed back down. So I don't like seeing that type of candle. Now, typically what I'm going to do is I'm going to buy the first candle that makes a new high on this pattern.

So the second this candle breaks the high of this red candle. I'm a buyer. But in this case what ended up happening is we had this, uh, this first candle that squeezes up right here. Then we have the pullback candle and then we have this gravestone dogee and then this next candle.

After that gravestone Dogee I Wasn't comfortable buying it right here I Just said no I don't think I can and it comes up here to about 3.95 39, 9, 6 and then it drops back down. so it ends up dropping back down just for a moment and then it pushes through. So what I'm going to do is I'm going to actually change this time frame to a 10-second chart. And so what we're going to do is we're going to break down that one minute candle into 10c candles so we can get even more zoomed in.

This kind of like a magnifying glass. So we're going to get zoomed in on this price action so you can better see what was happening in inside that little sort of two-minute pullback just before it squeezed higher. All right. So now these are a lot of 10-second candles here.

So we got to go all the way back here. All right. So now we're going to get a bit a little bit of a better picture. Okay, so what we're going to look at right here.

So what we have is the stock squeezes up right here to 350, right? consolidation right under the half dollar. That is very common. We often see stocks, uh, struggle and find resistance around half dollars and around whole dollars. So it went right from 350 up to 4.

It pulls back right here and you can see a number of these candles have this topping tail, these two candles. sort of these two candles and then this popped up here to a high of 97 and then it drops back down to a low of 3 74. So about a 20 cent drop. Now one thing that we could say is that the stock did appear to be holding this ascending support trend line.

All right. So even though oops, even though it did pull back, uh, it was holding this level of support, What it then does is it bursts through that $4 spot right here and it does it with some strength. It goes from 4 to 425 to 430 to 440, 40 to 460. It hits a high of 463.

It dips, it comes back up, and now double top resistance. It tries to dip and come back up again. Resistance: It dips, It tries to come back up again. Resistance: So now we're getting a very clearly established level of resistance on this chart up here, around 463.

What often happens is if the stock is able to break through that resistance, it's going to come back down and retest it. Can it hold? And let's see what happens. So let's go forward. It breaks, it breaks, and it sells off all the way back down to this orange line.

If you see this orange line here, this is the volume weighted average price. It's a technical indicator that a lot of Day Traders use. We'll also notice that it came down nearly to the yellow ascending support trend line, but it was able to Rally back up. and now we're getting closer to the open.

Going into the open, we see it squeeze up to a high of $558 It pulls back, it comes back up. It pulls back, it comes back up. and then you can see. watch this at the open.

Look at that move. So it came back up to this level at about 530. and right here it squeezes up and it halts up at $5.90 It then resumes, it dips, and it rips up into a second halt at 7:44 and then it resumes and halt straight down. So this is where we're getting into some serious volatility.

You know? This ended up definitely being a bit more volatile than I expected it. It was dramatic. These are some really big moves, so the fact is I in a way sort of feel like these trades back here. Um, some of them were sort of the easiest to me.

They were kind of the cleanest Once we got into the open. we got this sell off here. This was definitely a nice trade. Uh, that break over $530 But then to have this really big rejection candle was not great.

So here was a problem with this stock. This stock showed a history of doing some false breakouts. We had a false breakout right there. We had a false breakout right here.

We had some false breakouts right up here in this area. so all of these false breakouts were showing me that this stock couldn't be TR trusted and you know what also happened and it happened right in this area as well. There um what we were seeing on the level two on the tape were 50,000 share sell orders. So we saw a 50,000 share sell order at $55 this morning.

So the stock at $5 I think it was $55 right around there. So we have this big big sell order Now this the shares got bought up and the stock did end up going higher. but it left me scratch ing my head thinking who's selling 50,000 shares of the stock? Is it someone who's shorting it or is it someone who's been holding for a while? And if they've got 50,000 shares, what if they have 500,000 shares? And as the day went on we kept seeing these big sell orders. So what I suspect on this is that there was probably someone that had a really big position that was taking the 100% Gap as an opportunity to unload some shares.

Maybe it was an Insider who's been holding for a long time? Maybe an investor? I Don't really know. The stock on the daily chart has shown this long history of declining, so you know today for it to bounce up that much, it may have been an opportunity for someone to take some profit. Now it could have also been someone looking to accumulate a short position, but they shorted 50,000 shares, then at five and it goes up to six, seven to eight, almost to $9 a share. I mean they're down like 200 Grand and then they kept adding.

So at what point would they have stopped adding and started covering? You know, or did they cover I and I don't I'm not really sure. of course. Ultimately, it's impossible to know. we can speculate.

but nonetheless, the fact that I was seeing those big sale orders and the fact that we were seeing the stock had a history of showing these gravestone dois and these candles with big topping Tails it showed weakness to me and so for that reason I didn't get as aggressive on the stock as I would have on a stock that didn't show those warning signs. Those warning signs for me were like a red flag. Now when I'm trading, you know I I Love trading this pullback setup I Love having a stock that makes two, you know, three green candles, a couple candles pullback, then buying the first candle to make a new high looking for a move up and then I'll do a second pullback on it. second pullback comes back down and then again, we're getting back in for the next leg up.

You know that would be some nice clean price action, but unfortunately on this particular stock, the uh, the market on it was pretty thin. Uh, it. You know it was whipping around quite a bit. We were seeing these sort of dramatic pops and then flushes.

We were seeing some big sellers coming out and that to me felt that it was going to be more difficult to manage risk and and ultimately it it was more difficult to manage risk. and I think for me, it was the right move to trade it a little bit more conservatively. the fact is I can have a stock that perfectly meets all of my criteria. Here it has news.

It's is one of the top two, three, two to three leading gappers. It's priced between 2 and 20. It's got five times relative volume and the floats under 20 million. I mean I I would say literally.

Uh, Bdrx met all of those criteria and considering my biggest Green Day was nearly half a million dollars, you know you might think gosh, why didn't I make more on this than than I did today And the fact was, uh, and the fact remains that just because a stock meets all of the criteria for being worth trading does not mean that particular stock will um, display Perfect Price Action For any number of reasons. it could be due to short interest. It could be due to the number of insiders that are holding and wanting to sell. It could be due to the Quality the fundamental quality of the news headline.

especially with pharmaceutical companies, you know I'm not a pharmacist I'm not a doctor so I don't fully understand all of the headlines I Trade the price action and that's it's important to keep that sort of separate fundamentals and price action, fundamentals and technical analysis. As a day trader, I'm trading the chart pattern so if the Stock's moving up, I'm interested. but at a certain point there will be investors and Traders and these big institutions that say, wait a second this headline is no good. I'm going to start shorting a couple hundred thousand shares of the stock because I know this is going to go lower in a couple days when people realize that the underlying fundamentals of the news just isn't strong and I'm not in a position to really know that.

so uh uh. And the fact is, as a as a Trader you you can't be a master of everything. You know you get good at trading stocks and trading charts, but you're not going to be able to be a master at understanding fundamental analysis for every different sector of stock that there that we might trade. I'll trade stocks from all sectors.

You know we'll trade oil stocks. We traded a lot of those during the big covid boom. Uh, the market boom because the oil prices went up so much. There were the the Carn, the Carnival Cruise Line Norwegian Cruise Line the Cruise Line stocks.

You know to to be a master of every single industry and to be able to really understand the fundamentals of every news headline. It's impossible. So you've got to stay in your lane and know what you're good at. And so for me, focusing on trading the charts and unfortunately, the chart on this particular case study that we're looking at for today just displayed a few of these warning signs and I think right now we are, we're still in that market where, uh, you know it's it's been over a year since the S&P 500 made a new high so the Market's been a little bit more subdued.

We haven't s seen quite as many really extreme moves. so if you get a stock that goes up 100% you know you're kind of like all right This might be kind of getting exhausted. This might be the end of the move. so you may wonder how do I manage, when to keep trading and when to walk away.

So when it comes to the Gap and go strategy My Philosophy on this for a long time was that I'd be done trading by like 10:30 in the morning. Basically what I'm trading is the the news that came out overnight as the market responds to it in that first hour of regular trading from 9:30 to 10:30 and then for the rest of the day I'm not interested in anything unless something has breaking news in the middle of the day now sticking around to wait for something to have breaking news in the middle of the day. is tricky. You know what ends up happening is you're You're sitting here in the middle of the day, then all of a sudden you know you see something hitting the scanners and boom, you're jumping in.

But I've never found that the middle of the day is a time when I do particularly well. I think a lot of successful Traders and a lot of traders that have Deep Pockets and big accounts. They make their money early in the day and then they leave and they're gone. And so effectively, there's fewer Market participants in the middle of the day.

And with fewer Market participants, there's less people buying a stock. And with less people buying, well, nothing really happens. You know, Ultimately, a stock goes up because people see it. They see it using scanners, social social media.

This and that, and they buy it because they like the news. They like the setup. They like the chart pattern. So if a stock starts squeezing up it, you know, 7:45 p.m.

or 15 minutes before after hours closes. There's not many Market participants there to trade or to see it. So it's just at that window of time doesn't really even make sense to focus. So I still remain focused on the morning.

But because now stocks start squeezing, the second news comes out I sit down earlier. So usually news comes out at the top of the hour and the bottom of the hour. So 700 A.m. 7:30 8 A.m.

8:30 9:00 A.m. 9:30 and even 9:30 not so much. So really, the last window is like 9:00 A.m. the last kind of potential time for news to come out.

Now, trading before 7 A.m. is a little tricky as well because there's not as many Market participants because a lot of Brokers aren't even open before 700 a.m. so you can't even execute trades. Now, the broker that I use does allow trading as early as 4 A.m.

but I'm not waking up at 4 a.m. to do that even when I've been in Europe and in a time zone where it was easy to do that, there's just not a lot of volume, so there's really nothing to trade. So my window right now for trading is between about 7 a.m. and 10: A.m.

that's kind of the window 11:00 a.m. at the most. where I where I do the best and my rule of thumb of when to stop trading. So I've had days where there's news at 8 a.

and by $815 I'm already up $5,000 That's my daily goal. So you could say all right, you hit five grand. it's time to walk away. And on the one hand, I could do that I could just lock up that 5,000 and walk away.

On the other hand, what I think is if I have a day where I make five grand in 15 minutes the market is hot. This is the day if any that I should dig deep and trade a little longer. but we've all known Traders maybe we've done this ourselves I certainly have who have traded madebe x amount and then given all of it back and finish the day red and it's like man, why didn't you just walk away when you were green All right. Well of course if you walk away every time you get green, you're capping your profits because you're not making the most out of the best days in the market.

So where's the balance? This is what I think let's look at the Whiteboard So what I like to do in my own trading? Kind of like this actually. So I see a stock that goes up makes a move up. it pulls back a little bit and I want to buy it for the next leg higher so a little bit of pullback is okay. In fact, it's healthy.

How much is not healthy? Actually this is really funny because my cut off for a stock is if it gives back 50% of the move. My cut off for when I stop trading is if I give back 50% of my profit. Psychologically, there is something about giving back half that's just like at that point you know it's it's kind of done. So if this thing drops like that, I'm done.

Now if it pulls back to 50% you know you know maybe it could recover, but probably not. Realistically, if it pulls back more than 75, you know more than 25% to the 75% retracement. Mark it it. this is not really looking that great so we want to see it holding about 75% of its move and I feel that way with my my profits.

So oftentimes when I'm trading I'll think okay I'm up $2,500 and if I lose, you know 500 bucks I'm like okay I gave back 500 off the top, it's like 20% That's not too bad, but I got to be careful here I don't want to give back too much more and half is my cut off. and then if I have a trade and next thing you know I'm up 3,000 3500, 4,000 and I'm like okay now if I give back 800 again, it's like all right, I'm getting back 20% off the top. but let's not get back too much more. So that's the way I do it.

And so essentially the way I'm trading if we look at the Whiteboard again is uh, my P&l can go like this: I can have little pullbacks. you know that's not, that's terrible, it doesn't look like that. But anyways, I you know that I could have little pullbacks. but if I start, um, we'll draw this a little bit better.

But so if I start, um, stair stepping down like this. basically that's when I have to stop. So certainly at the 50% Mark and if I you know, kind of recognize that I'm kind of moving in the wrong direction a little earlier around the 75% Mark that's fine too. So that for me is my cue to walk away.

and by doing that, it allows me to stay in the market as long as possible to try to capture as much as I can on a day when the Market's hot. But make sure I walk away with profit in my pocket and I don't overstay my welcome too much. Now if you want to learn a little bit more about my strategy, you can check out my book How To Day Trade the plain truth it's on Amazon It made it to the best seller list within the first week of being on sale there. and this is a book that really does lay out the guard rails that I use in my own trading and explains very plainly, very simply and very honestly, the truth of what it is to be a Trader trading is hard.

I'm not going to sugarcoat it, but for those to find success, it can be incredibly rewarding. and I want to help those of you who are at the beginning of your learning curve. Make sure you avoid some of the rookie mistakes that I made as I was getting started because I made a lot of them and it cost me a lot of money, a lot of heartache, and a lot of frustration. So do yourself a favor practiceing a simulator before you put real money on the line.

Check out this episode, Check out this book and check out this episode right here that YouTube thinks you're going to love and I'll see you for the next upload real soon.