Trading Gaps Cheat Sheet $SPY $QQQ $MSFT $GLD $SLV
CHEATSHEET for TRADING GAPS:
4 types:
1. Common Gap (usually $SPDR S&P 500 ETF Trust(SPY)$ $Invesco QQQ(QQQ)$ on intraday charts)
Small gap in range-bound markets. Usually low volume and gets filled quickly.
2. Breakaway Gap ( $Microsoft(MSFT)$ earnings made one last week)
Appears at the end of consolidation. Starts a new trend. Often does not fill early.
3. Runaway (Continuation) Gap (GLD on the way up)
Forms mid-trend. Confirms strength and momentum. Trend continuation signal.
4. Exhaustion Gap ( $SPDR Gold ETF(GLD)$ and $iShares Silver Trust(SLV)$ near the top)
Occurs late in a trend. Often followed by reversal after momentum fades.
4 Rules of Gaps (How to Trade Them Properly)
Rule 1: Volume Confirms the Gap
High volume = meaningful (breakaway/runaway).
Low volume = likely common gap.
Rule 2: Context > Gap Itself
Location matters more than size.
Breakouts and trends = trade with the gap.
Late trends = be cautious.
Rule 3: Don’t Fade Strength Too Early
Never short a breakaway or runaway gap immediately.
Wait for exhaustion signals first.
Rule 4: Know Which Gaps Fill
Common & exhaustion gaps often fill.
Breakaway & runaway gaps usually don’t trade continuation.
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