This PreMarket Scanner strategy uses the scanner to find and trade stocks that have “gapped up” (are trading much higher than the previous day’s close) or “gapped down” (are trading much lower than the previous day’s close).

Once the scanner has identified gapper stocks, you’ll apply a simple first-hour breakout / breakdown strategy to enter the trade and a volatility expansion signal to exit the trade.

First, use the eSignal PreMarket Scan to get candidates for the day’s trade as follows:

1. In eSignal, select File: New: Scan
2. From the pull-down box in the upper left corner of your scan window, select the Pre-Market Scanner
3. Under “Pre-Market Scan Type”, select % Gainers
4. Set your maximum price limit as you wish but leave the minimum at $5
5. Set the Min Vol (k) to 5 and the Min Avg Vol (k) to 250
6. Run Scan

1. In eSignal, select File: New: Scan
2. From the pull-down box in the upper left corner of your scan window, select the Pre-Market Scanner
3. Under “Pre-Market Scan Type”, select % Losers
4. Set your maximum price limit as you wish but leave the minimum at $5
5. Set the Min Vol (k) to 5 and the Min Avg Vol (k) to 250
6. Run Scan

Open an advanced chart (File: New: Advanced Chart) with a 15-minute time interval. Overlay 13-bar Bollinger Bands, set to 2 Std Dev.

To do this, right click the chart and choose Basic Studies: Bollinger Bands. The Properties dialog will appear. Fill in Length with “20”, Std Dev with “2” and Source with “Close”. Choose “OK” and wait for the open.

Then, stand aside for 60 minutes, watching the gapper set up high and low pivots. For gap-ups, enter the long trade on the breakout above the high pivot. For a gap-down, enter the short sale on a breakdown of the low pivot.

After entry, place your stop loss just under the initial high pivot on a long position and just above the initial low pivot on a short sale.

Here’s a chart showing an example of long position of this trade.

At this point, you’ll place a trailing stop behind your entry, moving it when the long position goes higher or the short position goes lower. But, don’t move your stop until the current bar closes out and the next 15-minute bar appears.

To take profits, watch the Bollinger Bands closely.

For long positions, prepare to exit the trade when the price bar pushes above the top band so that 50 percent of the current bar lies outside the band. Take profits immediately when that bar closes out and the next 15-minute bar appears.

For short positions, prepare to exit the trade when the price bar pushes below the bottom band so that 50 percent of the current bar lies outside the band. Take profits immediately when that bar closes out and the next 15-minute bar appears.

Disclaimer: The strategies are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness. Nor is it guaranteed that using them will result in profits or that they will not result in losses. Past performance is not a guarantee of future results. Only risk capital should be invested in the market. All investments and trades carry risk, and all trading decisions of an individual remain the responsibility of that individual.