Gaps are a good source for trade ideas.
A PLACE TO START
I myself use gaps with equities as my starting place to find a trade idea each day. Gaps tend to be the biggest movers up or down by the end of the day. Gaps can provide an expanded trading range and expanded volume which creates a very nice trading environment.
LOOK FOR VOLUME
As a day trader, I am looking for increased volume because this means bigger players, i.e., institutions are throwing their weight around creating some waves where you could profit. Institutions are either selling the equity or they are buying it up. With the gap also comes an expanded trading range normally above the average true range of the stock. Extra volume means good liquidity and a larger trading range which creates a playground of setups to make capital with limited risk in a high reward environment.
BUILD A WATCH LIST
If you are new to trading gaps I recommend just building a watch list each morning of the gap ups and downs and watch them throughout the day to see how they respond to the gap. I guarantee that after a period of time of watching them you will begin to see allot of low risk, high reward trade setups.
