The idea
Some stocks open well above the previous close because of news: results, a contract, an upgrade. Day traders scan for these gappers before the open and watch the first few minutes.
Gap and go buys the continuation: once the first 1 or 5-minute candle is set, a break above its high suggests buyers are still in control, with the stop under that candle's low.
Watch it play out
Step by step
The rules
Setup
- A stock gapping up at least 4% on news, with unusually high volume before and at the open.
Entry
- Buy on a close above the high of the first 1 or 5-minute candle.
Stop-loss
- Under the first candle's low.
Target
- 2R, or trail the stop under each higher low.
Filters that help
- Avoid stocks with a low float and wild spreads.
- Skip gaps into an old resistance level.
Why it can work
Big news takes more than one candle to price in. When a gap holds in the first minutes instead of fading, latecomers keep buying, and the move often continues through the morning.
The research on opening range breakouts found the effect strongest in exactly these stocks, those with unusual activity because of news.
There is also a supply side: once price clears the first candle's high, sellers who shorted the gap expecting a fade are losing, and their buy-stops add to the move. When that happens on heavy volume, the move can last for hours.
Worked example
A stock that closed at $20.40 opens at $21.60 on results. The first 5-minute candle runs from $21.45 to $22.05. A later candle closes at $22.25: buy, with the stop at $21.40.
Risking $100, the 85-cent stop allows 117 shares. A 2R target sits at $23.95.
When it works, when it fails
Works best
On stocks with genuine news and heavy volume, in strong overall markets.
Struggles
When the gap fades: early sellers take profit and price falls back toward yesterday's close. Gaps without news fade often.
Common mistakes
- Chasing the first candle instead of waiting for its high to break.
- Trading illiquid, low-priced stocks whose spreads eat the edge.
- Holding a failed gap all day hoping it recovers.
Variations
- Gap fill
- The opposite trade: betting that a gap without real news will fall back to yesterday's close.
What the evidence says
Evidence: Popular, untestedWidely used, but no rigorous public testing. An idea to test yourself.
Gap and go is one of the most taught US day trading setups, but the specific rules have no rigorous public study. The related opening range breakout research found its best results in stocks with news-driven activity, which is the gap and go universe.
Most retail day traders lose money, as regulator studies show, and gap trading is costly in spreads and slippage. Test it on your own records.
Questions
- What volume should a gapping stock have?
- Day traders look for volume well above normal before the open and in the first minutes, often several times the usual early volume. Heavy volume suggests real interest behind the gap rather than a thin move.
- Does gap and go work on gap downs?
- Yes, in reverse: a stock gapping down on bad news, sold short on a break below the first candle's low, with the stop above that candle's high. Short selling adds borrowing costs and rules to check.
- What counts as a gap?
- When a stock opens noticeably above (or below) the previous close. Day traders usually look for gaps of 4% or more with news behind them.
- What is the difference between gap and go and gap fill?
- Gap and go bets the gap continues; gap fill bets price returns to the previous close. News-driven gaps tend to go, gaps without news tend to fill.
- When is the best time to trade gaps?
- The first 30 to 60 minutes after the open, when volume is highest.