Gap UP Strategy - Intraday Trading System

Updated: Apr 21

In the previous blogs, we have provided you with the basics as well as advanced concepts of the stock market. However, in this blog, we're going to see one of the most successful intraday trading strategies.

While trading using this strategy, traders would have to simply place orders, stop loss and take profit orders and just sit down in their chairs with no anxiety whatsoever.

It is because this strategy visually gives us confirmation without any price action patterns or any indicators or oscillators.

So, let's discuss the strategy more in-depth.

The strategy is, in fact, very simple, i.e., we are going to place an order where there is a gap up opening of the market.

For every other strategy like price action patterns, moving averages cross over, or RSI divergence strategies, the market's price movements should meet certain criteria to successfully employ this strategy.

Market Conditions:

  1. Consolidated movement in previous Days

  2. Pre-market change of at least 1% up

  3. RSI value

  4. SMA (simple moving averages)

This is the outline of our trading system. Don't worry about these if you find them confusing. It is by far the simplest strategy. Above all, we'll explain everything in detail with visual examples.

To begin with, look for the market's previous days' performances. Is the market have an unusually tight consolidated movement? That's what we're looking for. Be ready once you have spotted these criteria.

Don't place your trade unless the first candle is closed.

(Strong Consolidation and sideways market can be seen in this figure)

Following this, the price must have increased at least 1% but not more than 3%. If the market had already moved up more than 5%, it would've been exhausted already. So it is safe to stick with a 1 to 3% percent change in the premarket.

The premarket change will open the stock's price with a gap up, allowing us to place our trades.

(As you can see, the stock opened with a gap up of 1.07%. Its value is increased more than a percentage from its previous day's close during the premarket session. This means the stock has gained strong momentum overnight)

Finally, for confirmation, we're going to look at the Relative Strength Index's value and Simple moving Averages' movements.

RSI, or Relative Strength Index, shows us if the stock is over brought or oversold. If the value is over 60 and below 80, it adds another layer of confirmation. We can't buy a stock that is over-brought because eventually, the price would come down due to profit booking.


(The RSI's value is near 80 but because of its previous day's consolidation it managed to reach even 90)

The SMA or Simple moving averages are the averages of the price movement in a selected period of time. For example, the 200 MA averages the price of 200 candlesticks and gives us a visual representation.

For our strategy, the SMA must have consolidated, or at least the space between 20, 50, and 200 MAs should not be too big. If the spaces between them are too big, the prices will come down because of the loss of momentum.

(The moving averages are moving closely, which will likely end up in a strong breakout)

When these above conditions are met, you can confidently enter the trade. The success rate of this strategy varies from stock to stock. But in retail dominant stocks, the success rate is around 80 to 90 percent.

(In this image, you can see that you can be made more than 10% percentage profit using this strategy)

This is the strategy that I discovered myself in my initial stages of trading. Then I found that this strategy already existed, and I researched to make it perfect. Now it stands almost 90% successful.

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