Trading a Gap Open in Soybeans

The ag markets provide a lot of gap opens and these create opportunities for traders. When a market gaps, you know there are trapped longs or shorts from the previous session...all wondering what to do. The market is out of balance. In the video I walk through one approach to trading gap opens using the Footprint and order flow. This example is using soybeans but the principle applies to any market. Additionally, I took the opportunity to explain other Footprint patterns that can help keep you on the right side of the market.

Gap Open

Here is a candle chart showing the gap referred to in the video above that walks you through how to trade a gap open. The million dollar question to ask (and try to answer) on a gap open is the market going to 1) continue in the direction of the gap open or 2) revert back towards the previous day's close.

This is very difficult to impossible to judge using bars or candles alone.

soybeans candlestick gap open
soybeans candlestick gap open

Now look at the volume imbalance Footprint chart below. Because the Footprint allows you to see inside the bar, you can see much more than price. You can see volume and order flow. That is the key...being able to read if the gap open is being challenged and will revert back to close the gap, OR if the momentum is continuing.

In a gap up or gap down scenario, the momentum will eventually end. You want to know when that happens so you can either take profits or reverse your position and play for a trade in the other direction. Having the ability to "see inside the chart" provides opportunities you wouldn't have by just looking at bar or candlestick charts.

5 min soybeans footprint
5 min soybeans footprint

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