Preparing the day – gap, pre-market and session plan

Professional day trading starts 60-90 minutes before the open. Without a plan for the day you are the gap filler for those who have one. Preparation is not a forecast, only a scenario-based narrowing of the areas to trade and the places where you do not trade.

Lesson goal

• Build a pre-market morning checklist in 15 minutes.
• Measure the gap and classify it as tradeable / non-tradeable.
• Mark the levels of the day: overnight high/low, pre-market high/low, previous close, gaps.
• Write down plan A / B / C before the open.

Morning structure – timeline

T-90 to T-60 min: Global context Indices (S&P, Nasdaq, DAX), oil, the dollar, yields. Did the US / European session trend or rotate? Write one sentence.

T-60 to T-30 min: Universe of stocks/markets Filter: gap %, pre-market volume vs average pre-market, news. Keep 3-5 instruments max.

T-30 to T-0: Level and scenario plan Mark the levels and write the plan.

Gap – definition and measurement

A gap is the difference between yesterday’s close and today’s open (for stocks) or between the high/low of the previous session and the open.

Gap_% = (Open_today - Close_yesterday) / Close_yesterday * 100%
Gap_ATR = (Open_today - Close_yesterday) / ATR_D1_14
PreMarket_Vol_Ratio = Vol_pre_market / Avg_Vol_pre_market_20d

Pre-market high/low – why they are key

Pre-market high/low are the natural liquidity levels before 9:30 (US) / 9:00 (PL/EU). That is where the most stop orders of traders who are already in the game sit.

Rule for marking them:

• PM_H = the highest high in the pre-market (4:00-9:30 ET)
• PM_L = the lowest low in the pre-market
• ON_H/L = high/low of the overnight session for futures
• PD_H/L/C = high/low/close of the previous regular session

Your map of the day:

1. Is the open above or below PM_H/PM_L?
2. Is the open above or below PD_H/PD_C?
3. The distance to the levels – is it > 0.5 ATR? If not, there is no room.

Example of marking levels – a mini case

WIG20: yesterday’s close 2420, today’s open 2445, ATR D1 35 pts. Gap = 25 pts = 0.71 ATR. Pre-market does not apply to the Warsaw Stock Exchange (GPW), but ON futures high 2450, low 2425. PD_H 2435, PD_L 2405. The map: an open at 2445 is 10 pts below ON_H (little room to PM_H), 10 pts above PD_H (a potential retest of PD_H as support). If volume 9:00-9:15 >150% avg and OR 15m 2428-2452, you have a wide OR but with volume. Decision: do you wait for a retest of OR_H or for a breakout? With a wide OR a retest is better, because the breakout RR is 0.8.

The closing ritual of preparation

The last 5 min before the open: you close all tabs, you keep 1 chart + DOM. You ask the question: “Where am I wrong?” – you define the invalidation of every scenario. If you have no invalidation, you have no plan.

Day plan template

Date: ...
Focus instrument: ... (max 2)
Gap: ...% / ... ATR
PM Vol ratio: ...
D1 context: trend / rotation / at a level?
Key levels: ...
Scenario A (gap continuation): Entry when: ... Invalidation when: ...
Scenario B (gap fill / fade): Entry when: ... Invalidation when: ...
Scenario C (no trade / rotation): When price is in ... I do not trade / I cut size by 50%
Max daily loss: ... PLN / ... R
Trading hours: from ... to ... (hard stop)

Filters that make a difference

• Float / market capitalisation: low float + a large gap = extreme slippage, spread 1-2%.
• ADR – Average Daily Range: if the gap has already taken 70% of ADR, there is no fuel left for the rest of the day without a pullback.
• News: check whether the gap is on an earnings release or on a rumour. Earnings – a greater chance of continuation in the first 30 min.
• Pre-market spread: if the spread > 0.3% – let it go, it is a trap for market orders.

When the plan says DO NOT TRADE

• Gap > 3 ATR with no pre-market volume – manipulation on low volume.
• Pre-market high/low only <0.3 ATR apart – no space, a series of whipsaws.
• You have >2 instruments on the list and all of them have a gap > 2% – distraction guaranteed. Pick 1.
• You did not fill in the plan template – trading without a plan is gambling, not day trading.
• An open in the middle of yesterday’s range and no news – a rotational day, the edge on a breakout is close to zero.

Mistakes that cost the most

1. Trading every gap: a gap of 0.2% without volume is not a setup, it is noise.
2. No PM_H/PM_L on the chart: ignoring the levels where the stops of pre-market traders sit.
3. FOMO at the open: a market entry in the first 15 seconds with no defined risk. Slippage 3-5x larger.
4. A list of 10 companies in the morning: the inability to follow order flow and levels. Focus > intraday diversification.
5. No no-trade scenario: the plan assumes only making money, not protection.

Measurable exercise (45 minutes in the morning, 3 days)

Over 3 consecutive sessions:

1. 30 min before the open, fill in the template for 1 instrument.
2. Write down Gap_% and Gap_ATR and the PM Vol Ratio.
3. After the session, assess: was the gap filled, what was the 5m Open Range, did price touch PM_H/PM_L before 11:00?
4. Build a table of 3 rows – extract the rule: at what Gap_ATR and Vol Ratio does your market most often fill the gap vs continue.

Goal: your own database of gap behaviour, not a theory from the internet.

Check yourself

1. A company closed yesterday at 100 PLN, opens today at 103.5 PLN, ATR D1 = 2 PLN. Calculate Gap_% and Gap_ATR. How do you classify the gap?
2. Why is the pre-market high more important than yesterday’s close for the stops of day traders?
3. What is ADR and why do you use it to judge whether any fuel is left after a large gap?
4. Your open is exactly in the middle of the pre-market range with a Vol Ratio of 0.8. Which scenario is the most likely?

Frequently asked questions

Does every gap have to be filled? No. The statistics of fills depend on the market, the gap type and volume. Measure it on your market.

How many instruments should you follow pre-market? 1-2 to trade, 3-5 on the watchlist. Above that, the quality of your reading drops.

Should you trade gaps on the GPW the same way as in the US? The mechanics are the same, but pre-market liquidity on the GPW is negligible. Use ON_H/L from the contracts and a reference to DAX/US futures.

What if I have no pre-market data? Use the high/low of the first 15 minutes as a substitute, but cut your size by 30-50% because you have fewer reference points.

---

Educational content. Measuring the gap and volume does not guarantee an outcome. Every instrument has its own characteristics – test it on your own data.

---