US sessions, premarket and the gap

2 min read · When US stocks trade, what a gap is and why the morning decides the day.

Level:

Short version for experts: tables, lists and screenshots only.

Words in this lesson (10)

Gap — A jump in price: today trading opened noticeably higher or lower than it closed yesterday. Closed at 100 yesterday, opened at 108 today — an 8% gap up.

Short — Selling in the hope that the price will fall: you sell something borrowed, then buy it back cheaper. You make money when the price drops.

Volume — How much money or how many units changed hands over a period. A move on high volume is more reliable than one on low volume.

Level — A price where the market has already turned before. Support is below the price, resistance is above it.

Breakout — The price has gone through a level and held beyond it.

Setup — A ready trading rule: under what condition to enter, in which direction, where the stop and the target are.

Premarket — Trading before the exchange's main session opens. There are few participants, and the price moves easily.

Liquidity — How easy it is to buy or sell the size you need without moving the price. Little liquidity — hard to get in and out.

Slippage — The difference between the price you saw and the price at which the trade was actually filled.

Position — An open trade: what you have bought or sold and haven't closed yet.

Schedule (New York time, ET)

Session	Time ET	What happens
Premarket	4:00–9:30	reaction to news and earnings; little liquidity
Main	9:30–16:00	the bulk of the turnover
After-hours	16:00–20:00	earnings released after the close

New York is 7 hours behind Moscow in summer and 8 hours in winter. The main session opens at 16:30 or 17:30 Moscow time.

What a gap is

A gap is the jump between yesterday's closing price and today's price. Closed at $20 yesterday, trading at $23 in today's premarket — a +15% gap.

A gap appears because of news: earnings, a contract, a regulator's decision. It's the main source of daily moves in US stocks.

What a gap tells you and what it doesn't

Tested on history: among the ten stocks with the biggest gap, an intraday move of 10% or more happened on 82% of days. Among all stocks — on about 9%.

So a gap predicts that the stock will move. But which way is almost a coin toss: after a gap up, the stock can keep rising or fall all day long, "closing the gap".

The morning's key levels

Know them before the open — they're drawn on MAMAY's charts:

yesterday's close — this is where the gap gets "closed";
the premarket high and low — a break of the high after the open shows the buyers' strength, a break of the low — the sellers';
the high and low of the first 15 minutes of the main session — the "Opening Plan" setups are built from them.

Things people forget

In the premarket and after-hours liquidity is low: it's harder to get in and out, and slippage is bigger.
To short, your broker needs to lend you the stock. Stocks that have fallen sharply are subject to a short sale restriction (SSR).
It's better not to hold positions into the close or into news.

↗ Open "US Premarket" in MAMAY ▶ Next lesson: Opening Plan