Today's Quote: “Education should include knowledge of what to do with it." Unknown.

We finished discussing the first type of watchlist, the Daily Watchlist, in yesterday’s lesson. The second ‘weapon’ or watchlist we use to find plays during the trading day is the ‘Gap List’.

Today we will discuss how to make and use this watchlist. Gaps are an excellent source of plays throughout the trading day. They are often in play immediately at open and can be in focus the entire trading day. Some gap strategies require almost immediate entries, some look for pullbacks at lunch time. You definitely want to keep a list of gapping stocks to track if you are an intraday player.

Most trading platforms or charting packages have some form of gap list. If not, third party softwares can scan for gaps. While not as efficient, many websites can supply some form of gap list. A great source to find the gapers is VCM Scanner Pro™ which is VCMs real time scanning tool. Finding gapers is only one very small feature out of a very long list coming from VCM Scanner Pro™.

When you find the list of gapers, review that list for stocks that are gapping a ‘significant’ amount. Almost any stock gaps a little, but for most strategies we want to track the larger, more meaningful gaps. Also check to see if the stock trades enough volume, both on prior days and on the current day. Last review the pattern to see if there is any possible strategy. If it has a significant gap, trades with enough volume, and you recognize a possible strategy (it does not have to meet the test to be a trade at this point, just so it could be a strategy), put if on your own list in your trading platform as a ‘gapper’. You may want to separate bullish and bearish gapers to help you stay organized.

It may also be worth it (especially if you have many gapers on your list) to set up a page in your trading platform with all 5 minute charts and distribute your gap list among these charts. Then you can see all the intraday set ups at just a glance. You will keep this list out and refer to it throughout the trading day. Many of these charts will become ‘power trends’ and many will form strategies almost at the open. This concludes the gap list as the second of the five lists you will use on a regular basis. Next list up for tomorrow: The Favorites List.