Hi everyone, I am going to share one of my common trade setups, the gap fill trade. I am not great at choosing direction and the gap fill really helps me. First a few things I look at. The Gap fill, Half-Gap, and Daily Pivot.
Gap Fill: The difference between the the 4pm close on the previous day and the 9:30am open. A gap can only fill during trading hours. I am looking to trade in the direction of the 4pm close from the previous day.
Half Gap Fill: After the 9:30am open, half the difference between the previous 4pm close and the 9:30am open. Traders will take profit here often.
Daily Pivot is determined by the previous day’s high, low and closing price. If we run into a daily pivot, I watch to see what reaction we get from it as it sets the tone for the day and I can use it as an entry.
Here is a picture of the price points. This is a 15 minute ES Chart from 11.28.22
Red is the Full Gap, Yellow is the Half-Gap and White is the Daily Pivot. Credit for the chart goes to eminiaddict. These three help me choose a direction that the market will want to go to before moving in the next direction.
There are many other factors I look at before entering a trade, but for simplicity, I will just show you the approach I took for this particular trade. I generally enter using Fibonacci Retracements. It’s a common tool in any charting software. I draw my Fib retracements from lows to highs or highs to lows based on the timetable I am trading. I almost always try to use 15 minute charts to remove some of the noise.
The gap likes to fill within the first hour often times. This is what I started with.
I had this fib setup drawn since 7:30ish Am looking for an entry toward the gap fill. I’ve learned that with the Fibs 78.6 seems to be about the max I’ll allow a trend to re-trace and often times in the direction of the gap fill I can get an entry around there to ride the wave of big money. I entered at 3997 with a Stop of 3994 on 4 contracts.
Once ES hit 4002, I took off half and then set up targets just before 4018 as that was the half gap fill. The Full gap was at 4035ish but I thought to get there we would need to make a pullback and I did not want to give away that much profit.
I removed my other 2 contracts at 4012 and 4015 for a total of 43 ES points or $2150.
Another reason I set my 3rd target at 4012 was because of the volume profile. This is another tool that can be used to look at the auction. I saw the path of leash resistance was up until we hit the Point of Control around 4012. This is why I was taking profit around there.
I’ll be going through more indicators I’ve learned to use and what purpose they service in future posts. For now, what do you think about the ES Gap Fill entry? I use fibs as they really resonate with me from a technical perspective but also a spiritual perspective. Let me know if you have any questions!