Gap Fill Strategy

Use pre-market scanners (TradingView, Finviz, broker platforms) to scan for gaps. Look for stocks where the pre-market price or opening price differs significantly (>0.5%) from the prior close. Most brokers have built-in gap screeners.

Monitor pre-market starting around 9:00-9:15 AM ET to identify gaps. Most gap fill action occurs in the first 1-2 hours after the 9:30 AM market open. Have your watchlist ready before the open.

Shorting requires a margin account and the ability to borrow shares. For beginners, focus on gap down fades (going long) which are simpler. As you gain experience, you can add gap up fades (shorting).

Studies suggest 70-80% of gaps eventually fill, but this varies by gap type. Common gaps fill 80%+ of the time, often same day. Breakaway and runaway gaps may not fill for weeks or months. Focus on high-probability common gaps.

Yes, you can buy gap downs in your TFSA. Shorting is typically not allowed in TFSA, so you'd focus on gap down fade trades (buying). The moderate frequency is acceptable for TFSA.

Check: 1) News - major catalyst suggests breakaway, no news suggests common; 2) Volume - high volume suggests breakaway/exhaustion, low volume suggests common; 3) Location - breaking S/R suggests breakaway, within range suggests common; 4) Trend context - gap with extended trend may be exhaustion.

At-open entries capture more of the move but have more false signals. ORB (opening range breakout) has higher win rate but smaller profits. For beginners, ORB is safer. For larger gaps, always wait for confirmation.

Use scaled exits: take 50% off at 50% fill, remaining at full fill or EOD. Or target partial fills directly (50-75% of gap) for higher win rate. Both approaches improve risk management.

Intraday gap fills are most common and lower risk. Holding overnight exposes you to overnight risk. Only hold if: you're comfortable with swing trading, the gap is larger and needs more time, and you reduce position size.

Large earnings gaps are often breakaway gaps that don't fill quickly. Don't fade earnings gaps same day unless they're exhaustion type (third gap, extended move). Wait for dust to settle or skip.

Use APIs (TradingView, broker APIs) to pull pre-market and opening prices. Calculate gap % = (Open - Prior Close) / Prior Close × 100. Filter by gap size (0.5-3%), trend (vs 50 MA), RVOL, and news flags. Output ranked list at 9:25 AM.

Backtesting typically shows 0.5%-2.5% as optimal for day trades. Below 0.5% may not be worth commissions. Above 2.5-3% often has strong catalyst and lower fill probability. Test your specific market and instruments.

Ranging markets: more aggressive gap fading, gaps fill reliably. Trending markets: reduce gap fading, focus on counter-trend gaps only. High volatility: widen stops and targets; adjust size parameters. Track regime-specific performance.

Failures occur when: 1) Gap was actually breakaway/runaway (misclassified), 2) Strong catalyst keeps price at new level, 3) Gap breaks significant S/R that becomes new support/resistance, 4) Trend is too strong. Always have stop and time limit.

Use walk-forward optimization testing: gap size thresholds, entry method, target levels, time stops. Track performance by category (size, type, direction). Optimize for profit factor and Sharpe, not just win rate. Avoid over-fitting.