folks welcome back all right so we're going to be doing a very specific study on the smart money concept opening range Gap right so obviously I started this lecture series off with some general commentary around it as I stated I would be doing very specific details and rules and things that nature around the model that I'll be employing in 2025 so an opening range Gap obviously I see a lot of students with confusion they they're thinking that the new day opening Gap is the opening range Gap and hopefully we'll clear that up for them today first and foremost you have to check to make sure that your chart is showing in the regular trading hours not electronic trading hours you find that in the lower right hand corner usually you'll see rth or e T right here and it has to be toggled to regular trading hours and the time zone has to be set to New York always all right so we're going to be looking at this Candlestick right here on a one minute chart that's the time frame that's being shown here so this Candlestick if you take a look at this candlestick's Clos price you can see it up here 21497 and I'm highlighting it here so that we can see that the Candlestick is basically small little bodyless candle and I didn't want to hide that by having that little annotation covering it up so that's your first point of Interest which is previous day's regular trading hour settlement price that's always going to be as you can see here at the 4:14 p.m. eastern time on a one minute Candlestick here we can see at 9:30 a.m. on the very next day traing hours is going to only show the difference between where we settled the previous day at 4:14 p.m. to now the first opening price at 9:30 eastern time again all New York local time so this here shows that we're opening higher than where we settled in regular trading hours the previous trading day 9:30 a.m. eastern time higher opening price in regular trading hours is classified as a premium opening range Gap the opening range Gap is 120 handles or larger price could leave the Gap unfilled and you have a premium opening range Gap what you're doing is you're going to take your Fibonacci and this is the FIB settings that way you guys can have it real quick reference point you're going to take the FIB and anchor to the previous settlement price at regular trading hours at 4:14 on a one minute chart you're going to drag the Fibonacci up to the opening price the next trading day at 9:30 eastern time and again your chart should be toggled to regular trading hours it should look like this in the lower right hand corner when you're on that one minute chart these are the settings that have to be toggled and if your numbers don't look like this all you have to do is just double tap inside of every individual gray box and type in what you see mine is showing here now obviously when you have a large gap like this which is a couple hundred handles between the previous day's regular trading hour settlement at 414 p.m. to the opening price at 9:30 eastern time the following day with such a large gap like that the rules I employ is that it's probably going to keep going in the direction of an extreme Gap like that and if it ever it may not even do this much but if it ever does trade below that low usually it's going to stop around the upper quadrant and you can see that here okay so 25% of the opening range Gap is usually what you'll traded there and I actually gave you this earlier in the week with the lecture the very first lecture outlined it and then I traded with that same logic that evening going into the midnight opening range which allowed me to segue into that smart money concept when there's a large gap like this okay 120 handles is a good ballpark number where it could potentially keep the the Gap unfilled meaning that it doesn't come all the way back down to the previous day settlement price but it will eventually at a later time do that very thing now if you are seeing the market trade higher as we go into an economic report on the calendar uh this could usually be kind of like pumping the market up higher and then a later time in the same week or the very next day it can trade down into that level here and maybe go into the middle of the gap which is consequent encouragement this is that 50% level here eventually price will want to rebalance all of this here because it's inefficient because there no price at all zero so this is an actual liquidity void it's not a buy sign and bound sell sign and efficiency it's an actual liquidity void it's an actual void because there's no trading buying or selling between the price of this closing price and where we opened at 9:30 using regular trading hours now obviously when we start trading at uh 6:00 p.m. unless this is a a Friday which it's not because you can see it says Monday at Monday eastern time at 6: pm. the market will open up and then whatever it does between then and 9:30 that's shown in Electronic hours we don't need to see that here because the opening range Gap is the defined by regular trading hours only soon as you start showing electronic trading hours what you're looking at there is new day opening gaps and or new week opening gaps so just make sure you know in your notes if you're looking at your time reference in the lower right hand corner regular trading hours is always going to denote what the opening range gaps going to be if there is a gap if it's showing electronic trading out hours eth then it's going to give you the information that we derive for New Day opening gaps and or new week opening gaps okay obviously when the market shows a lower gap opening using the same parameters at 4:14 p.m. and we open down 9:30 eastern time the following day again using the regular trading hours this lower gap opening when we have that at 930 Eastern if that lower opening price in regular trading hours is appearing then that is classified as a discount opening range Gap if it's this large again we have several hundred handles the 25% of the opening range Gap or lower quadrant here that would be your your target if at all it may not even trade back to the high or even go back into the Open Range Gap so we would use the rules as I outlined when it was a premium open Gap so let's take us back to that premium opening Gap and I want you to think about how when we're looking at a lower gap opening we would be drawing the Fibonacci down or whereas a premium opening Gap we're drawing it up so it gives you the the proper classification for the quadrants upper quadrant here would be the a quarter of the opening range Gap if we are trading in between 20 and 75 handles with an opening range Gap whether it be premium or a discount Gap and again the classification is only determined by if it gaps higher at 930 that's a premium it's a gap higher if it gaps lower at 930 than where we settled at 414 that's a discount opening range Gap okay and the only reason that's important is it helps you determine what direction you're going to draw the FIB one so premium opening range gaps are drawn from the previous day's 4:14 p.m. Eastern times settlement price up to 9:30 opening next day again toggled on regular trading hours and reverse it for Discount opening range gaps but if it's 20 to 75 handles usually if it's a premium opening range Gap like this what I like to look at with electronic trading hours okay so this is for your notes you got to write this stuff down I going to do everything for you if it opens higher I like to see it trade to a free market session that means anywhere between 6:00 in the morning Eastern Time to 9:30 all that time there is pre-market so if we have a premium opening range Gap like this at 930 I want to see it trade to some overnight London high or relative equal highs or some high that was formed between 6 o'clock in the morning Eastern Time to 9:30 is opening price so it's going to run buy side initially and then I would look for it to trade back down into minimum consequent encroachment which is the red level here or middle the Gap and depending upon how I'm bullish or bearish or if I'm just trading inside of a range will determine whether or not I'm going to look for a complete Gap closure and there's a lot more rules we'll talk about before we get to the end of this month and I'll have all those details for you but we're just giving you very specific rules that I'm going to be employing for the majority of the times when I'm using opening range gaps in 2025 with this model I'm giving you in detail everything I'm saying for when it's a premium Gap you're just going to reverse the logic for a discount opening range Gap but here you can see it's the very next day here where that Gap higher the premium opening range Gap it trades up and it eventually comes back down into day the that 3:00 in the afternoon trades down into that upper quadrant so you can see how it was not willing to come all the way back down and close in that gap which should be a perfect re delivery to that price it's it's not happening here but it does trade to the upper quadrant of that Gap now why is it called the upper quadrant because the Gap starts here at the previous day at 44 eastern time and opens here so since it's an up Gap or premium Gap think about this as the range well this is the upper portion of that Gap this is the middle of that Gap this is the lower quadrant that Gap and this is the low of that Gap so when it's an extremely large gap opening my interest is only at this upper quadrant and then I'll see if it wants to have any interest in going back down into the middle of the Gap but 20 to 75 handles I like the odds of it trading to midgap now there's a sweet between 75 and 120 handles where it can go either direction so so I usually air on the side of what do I see in other analysis Concepts that is going to help me because I may have to just sit on my hands and wait till 10 o'clock and not trade anything at the opening range which is the first 30 minutes of trading between 9:30 eastern time to 10 o'clock so when I have 75 handles to 120 handles or or less than 100 handles or so um these are just general rules where I have to lean on what the market has in price where we are with the economic calendar and where we at with seasonal Tendencies the the current market structure all these things have to be referred to when the range is higher than 75 handles all right and then obviously the very next day entire new trading day we have another Gap here now this is the opening range gap which is very very small here but it opens trades down comes right back up into it here and then we break lower all these lines here are derived from the previous 24-hour session where that opening range Gap formed so that premium opening range Gap that's what these levels are here so this is the high of that previous opening range Gap the upper quadrant that I said that it would trade down to you can see it when it did it here and then we just Consolidated hit it once more and then we rallied up and then the next day at 9:30 this is 4:14 p.m. on this Candlestick right there now if I toggle one more over now you're looking at this price which is 9:30 in the morning on Tuesday January 7th 2025 we break lower trade back up into that opening range Gap breaks lower trades to the upper quadrant of the previous day's opening range Gap then it goes consequent encroachment lower quadrant and then a complete closure of the previous day premium opening range Gap and then you can see how the market used all of those levels here and it moves a little bit lower into the the session when you're looking at your regular trading hours chart you want to highlight every Gap you have a gap here on the 3 of January 2025 you have the Gap that we started this lecture here with and then that smaller one here that's shaded and then there was obviously one over here but you're not going to include that for this discussion but when the market opened up here this Gap is a liquidity void where it's zero trading no buying or selling during regular trading hours so this is an actual liquidity void when you see moves like this this has unfortunately been classified as a liquidity void it's not actually because there's actually buying and selling going on inside of that candlesticks range over here for reg trading hours there is no trading there during electronic trading hours there probably is but for the sake of doing the analysis with regular trading hour charting when there's gaps like this the market will want to do Patchwork where it'll deliver back down into it and offer price between these two defined levels where the previous settlement at 4:14 p.m. eastern time to to 9:30 the next trading day same thing over here this is a premium Gap this is a premium Gap okay so premium opening range gaps start with the FIB at the low up to the new 930 opening price just as we did here because it's a premium opening range Gap you anchor it to the closing price at 414 eastern time and you draw the FIB up and it shows your quadrant levels where you're going to be utilizing that information so here as the market starts to sell off look how the consequent encroachment offers another shorting opportunity mid Gap right here breaks down comes back to the lower quadrant of this Gap rolls over uses the low of the Gap starts to break down and trades into the opening price here which is the high of this opening range gap which is a premium opening range gap on the 3rd of January 2025 so the market trades down into it here hits the high of that opening range Gap there trades down the consequent encroachment look at the bodies see how they're respecting that midpoint then rallies up and then breaks down look at the bodies respecting the low of that opening range Gap and then look at the reaction there rallies up takes out the relative equal highs here and then it's most likely going to want to gravitate towards these relative equal lows here that's just a little too clean things like that price levels like that don't usually stay intact and the market will want to go and disrupt that the smooth edges will be made Jagged so there's some principles there's some uh very specific rules that I'm going to be employing as you can see not very complex it's it's complex if you've never worked with the r trading hours and moved and toggle between electronic trading hours and R trading hours but it's not complicated in terms of the logic so the rule-based ideas that I've applied here they're very specific but there's a gray area it's above 75 handles up to 100 handles or more but not 120 where I can go both directions so I'm a little bit more flexible in that range but anything higher than 120 handles I'm going to be Leery and anticipating that Gap IM immediately being refilled or rebooked to at least half the Gap it can but I want to have a little bit more information besides just using this information in and of itself right folks I want to thank you for your continued interest if you like these kind of lectures and you want to continue your learning the best way to show that you're appreciating it is a free thumbs up on the video I promise you it doesn't cost you anything until I talk to you next time good luck and good Trading