Given that we might want to consider fading a small gap, we can give a it a bit of 'room' to develop before committing to a trade - it is, after all, likely to come back. The average trader seems to prefer watching first hour (the time when allegedly 'silly' money comes and goes), and then deciding on a trade. Within this first hour, a small gap will often have 'settled', or even begun process of falling back towards previous close. Whatever situation, a 'range' will have been defined by that first hour's action - generally strategy then would be to go long above that range, and short below it.

With this in mind, it is helpful to consider trading on basis of '4 types' of gap that are generally supposed to exist. The first of these is 'Full Gap Up'. This happens if opening price is greater than yesterday's high price - A big jump, in other words. Likewise, a 'Full Gap Down' is when opening price is less than yesterday's low. A 'Partial Gap Up', on other hand, happens when today's opening price is higher than yesterday's close, but NOT higher than yesterday's high. In same way, a 'Partial Gap Down' is when opening price is below yesterday's close, but NOT below yesterday's low.

These 4 gap types each have a long and short trading signal, giving us 8 gap trading strategies which are discussed in detail on www.traders101.com . All are based on a gap trading strategy in which you wait 1 hour after market open so a trading range can be established. Trading before that time is up is possible, although it involves more risk. As always, sensible stoploss methods to minimize losses if things go wrong are mandatory! Good luck with it!