What Is a New Daily Open Gap?

For many new retail futures traders, understanding market gaps can feel a bit overwhelming. One term you’ll frequently come across in your trading journey is the "New Daily Open Gap." This article breaks down this concept, explains its significance, and shows how using a futures prop firm can enhance your trading experience.

What Is a New Daily Open Gap?

A New Daily Open Gap refers to a price gap that occurs between the close of one trading session and the open of the next. It happens when the opening price of a contract or futures contract is significantly higher or lower than its previous closing price. This gap can present trading opportunities as market forces adjust to the new pricing levels.

Understanding these gaps can help you make more informed trading decisions, especially if you’re using a futures prop firm that provides real-time data and market tools to track such movements.

Gap Basics: Understanding Market Gaps

A market gap occurs when a security’s price jumps between two levels without any trading in between. Gaps happen for various reasons, including economic events, earnings reports, or geopolitical news. As a retail futures trader, learning to recognize these gaps is crucial, as they can signal market volatility or the potential for trend reversals.

Gap Up vs Gap Down Stocks

• Gap Up: When a stock opens higher than its previous close, it’s called a gap up. This is often a result of positive news or strong market sentiment.
• Gap Down: Conversely, a gap down occurs when a stock opens lower than its previous close, usually due to negative news or market pressure.

Types of Gaps in Trading

There are different types of gaps that retail traders encounter. Each one tells a different story about the market, and understanding them can lead to more precise trading decisions.

Breakaway Gap

A breakaway gap signals the start of a new trend and often occurs when a stock or futures contract breaks out of a price range.

Exhaustion Gap

This type of gap typically marks the end of a price trend and is often accompanied by high volume. It signals that the market could be reversing.

Continuation Gap

Also called a "runaway gap," this occurs during an ongoing trend, indicating that the current trend is likely to continue.

Common Gap

Common gaps are usually filled quickly, meaning the price eventually returns to the pre-gap levels. They often occur in less volatile, more stable markets.

Identifying a New Daily Open Gap

So, how do you identify a new daily open gap? Futures prop firms often provide advanced tools and platforms that make it easier to spot these gaps in real-time, giving you a competitive advantage in the market.

How to Spot Gapping Stocks

One way to identify gapping stocks is by monitoring pre-market or after-hours trading. Many futures prop firms offer access to gap scanners that highlight stocks or futures contracts with significant price differences between their last close and the next open.

How to Use a Gap Scanner

A gap scanner is a tool that automatically detects and highlights stocks or futures contracts that are showing signs of a gap up or gap down. It’s a valuable resource for traders, especially those using prop firm platforms where you can access real-time market data and automated alerts.

How Traders Utilize New Daily Open Gaps

Once you’ve identified a new daily open gap, how do you capitalize on it? Futures traders often use the Gap and Go Strategy to trade these market movements.

Gap and Go Strategy

The Gap and Go Strategy involves buying (or selling) when a stock or futures contract shows a significant gap at the open, with the assumption that the price will continue in the direction of the gap. This strategy can be particularly effective when supported by the risk management tools offered by futures prop firms.

The Importance of Gap Filling in Trading

Another key concept to understand is gap filling. This happens when the price retraces back to the level where the gap began, effectively "closing the gap."

Fill the Gap Meaning

Gap filling is an important strategy for futures traders. If a gap is filled, it means the price has moved back to its original pre-gap level. Traders can use this movement to predict potential reversals or corrections in the market.

Examples of Successful Gap Trading

Traders who capitalize on gap filling can often make significant profits, especially when using the tools provided by futures prop firms, which offer real-time alerts and data to track these movements.

Risk Management When Trading Gaps

Trading gaps can be highly profitable but also risky, particularly for new traders. Futures prop firms often provide structured risk management systems, which are crucial when employing gap trading strategies. By using stop-loss orders and following the firm’s risk guidelines, you can limit potential losses and protect your capital.

FAQs About New Daily Open Gaps

What causes a new daily open gap?

A new daily open gap is usually caused by major news events, earnings reports, or significant changes in market sentiment that occur outside of regular trading hours.

How do I trade a new daily open gap?

Trading a new daily open gap involves identifying the gap, determining whether it's likely to fill or continue, and executing a strategy such as Gap and Go or gap filling.

What happens when a gap doesn’t fill?

When a gap doesn’t fill, it could signal that the price is continuing in the direction of the gap, meaning the trend is strong. In this case, traders often follow the trend until signs of reversal.

How can I use a gap scanner effectively?

A gap scanner highlights stocks or futures contracts showing significant gaps. You can use it to quickly identify opportunities and develop strategies around the gaps that align with your risk tolerance.

What is the difference between gap up and gap down?

Gap up refers to the price opening higher than its previous close, while gap down refers to the price opening lower. Both offer unique trading opportunities depending on the market sentiment and news driving the gap.

Conclusion: Mastering the New Daily Open Gap

Mastering the concept of the new daily open gap is crucial for futures traders, especially those who are just starting. With the right tools and strategies—many of which are provided by futures prop firms—you can turn these gaps into profitable opportunities while minimizing risk. Prop firms offer a range of benefits, including funded accounts, advanced platforms, and structured risk management, all of which can help you grow as a trader.

FAQs About Funded Futures Network

How many accounts can I trade simultaneously with Funded Futures Network?

You can trade multiple accounts with Funded Futures Network, each offering different levels of funding and flexibility. You can have a total of 10 accounts however you can only copy trade 5 accounts at a time.

What platforms are available for trading with Funded Futures Network?

We offer access to professional-grade trading platforms like EdgeproX and FundX, designed to provide real-time data and advanced trading tools to enhance your strategies. These platforms are white labels of Motivewave and Quantower.

What are the fees after passing the evaluation?

After passing the evaluation, traders are subject to platform fees and profit splits, all of which are clearly outlined during the onboarding process.

Can I trade during high-impact news events?

Yes in the evaluation you can but in the exhibition and funded accounts you can not. However we recommend using caution due to increased market volatility during these periods. In the exhibition and funded accounts you will need to be flat 1 minute before and 1 minute after Red high-impact news events related to your product and anytime Powell's events are happening. You see these new events in your Funded Futures Networks dashboard under the reporting section.

What are the withdrawal policies for Funded-Pro accounts?

Funded-Pro accounts offer flexible withdrawal options, allowing traders to withdraw profits weekly or monthly, depending on their account setup.