gap rules

Guidelines to follow on any day that the futures open outside of the prior day’s RTH range. Only opening outside of range is a true gap and puts gap rules in play.

1. Go with all gaps that don’t fill right away. This means that if early trade doesn’t start to correct the imbalance, then prices will probably move in the direction of the gap.
2. Larger gaps can often fail to fill on the first day or may fill only partially.
3. If the gap fills (meaning the prior day’s RTH high is touched on a gap up or the prior day’s RTH low is touched on a gap down) and value cannot get to at least overlapping, then the odds of a late day rally (on a gap up) or late day selloff (on a gap down) increase.
4. Gaps of larger than $10 in the /ES are difficult to trade and should be avoided early in the day as the market usually tends to just “digest” the overnight move and not go anywhere. In such a situation, day timeframe players should focus on individual stocks rather than futures as there will be more playable movement.