What is a premarket gapper?
A premarket gapper is a stock whose first trade of the day is well above or below where it closed the day before. In US stocks, the premarket runs from 04:00 ET until the regular session opens at 09:30 ET, so a stock can gap, and move a long way after its gap, before most of the market is awake.
A gap is measured from the previous close to the session's first trade, which can come at any time from 04:00 ET. If stock A, a made-up example, closed at 3 dollars and its first trade this morning is at 3.60, it gapped up 20%. How far it has moved since that first trade is a different number: its % change, measured from that open to the current price. If stock A trades at 4.14 at 08:00 ET, it gapped 20% and is up 15% since its open.
Keep the two numbers apart. A stock that gapped 30% and has been sliding since its first trade is a different situation from one that gapped 10% and has climbed all morning, even if both look "up a lot" on a list.
Small-cap gappers draw day traders because they combine three things: a reason for attention, usually news; a price that moves in large percentages; and, often, a limited number of shares available to trade. That mix is what makes them move fast, in both directions.
A premarket scanner is the tool that finds them. It checks every stock against a few rules and lists the ones that pass. Those rules are the scanner's settings, and choosing them is most of the work.
Starting filters, and why each one is there
The settings below are common starting points among small-cap day traders, not rules. Start with them, look at what your list gives you for a week of mornings, and change one filter at a time.
One thing to know before you build it in Traderly: its market data is delayed 15 minutes, so the scanner shows the premarket as it was 15 minutes ago. That is fine for building and studying a morning list, and for practicing in replay. It is not a tool for timing an entry.
Gap %: from the previous close to the open
The gap filter keeps only the stocks that opened far enough from their previous close. A common starting point for small caps is a gap of at least 10% to 20%. Below that, you get dozens of stocks moving on nothing in particular. Far above it, you can miss stocks that build through the morning.
In Traderly the filter is called Gapped up %, with Gapped down % for the other side. It measures the session's first trade, from 04:00 ET, against the previous close. How far a stock has run since that first trade is a separate filter, Up % since the session's open: that is % change, from the open.
Price band
Many small-cap traders limit their scan to a price band, often somewhere between 1 and 20 dollars. Under 1 dollar, stocks trade in fractions of a cent and behave differently. Over 20 dollars, each share costs more, so the same risk buys fewer shares, and the moves tend to be smaller in percentage terms. In Traderly this is the Price filter, set to Between two values.
Premarket volume
A stock that gapped on a few thousand shares can't be traded at the open. A volume filter keeps only the stocks that have already traded a meaningful amount. Common starting points sit somewhere between 50,000 and a few hundred thousand shares by 08:00 or 09:00 ET, higher the later you scan.
In Traderly this is Traded today: the session's volume from 04:00 ET, so before 09:30 ET it is the premarket's volume.
RVOL
Relative volume, or RVOL, compares how much a stock is trading with how much it usually trades by the same time of day; the guide to relative volume explains how it is calculated. Traders commonly start at an RVOL of about 2 and look more closely past 5. In the first hour of the premarket the readings swing a lot, so many traders lean on raw volume early and on RVOL later in the morning.
In Traderly this is the Relative volume (RVOL) filter. On the daily bar, it compares today up to now with the same time of day over the number of sessions you choose.
Float
The float is the number of shares available to trade, leaving out the shares held by insiders and other long-term holders. A low float means a smaller supply of shares, so a burst of demand can move the price further. Many small-cap traders filter for floats under 10 or 20 million shares, and some go lower.
In Traderly this is the Float filter, with Above, Below or Between. A stock with no float on record never passes it, so a float filter also drops the stocks the data doesn't cover. Keep that in mind when a name you expected is missing.
Put together, a starting scan could look like this:
| Filter | Common starting point | Why it is there |
|---|---|---|
| Gapped up % | At least 10% to 20% | Keeps stocks that opened far from their previous close |
| Price | Between 1 and 20 dollars | Keeps stocks that move in large percentages and fit a small account |
| Traded today | At least 100,000 shares by 08:00 ET | Keeps stocks that can be traded at the open |
| Relative volume (RVOL) | At least 2 | Keeps stocks busier than usual for the time of day |
| Float | Below 20 million shares | Keeps stocks with a limited supply of shares |
These numbers are illustrative starting points. The same settings give a very different list on a quiet morning and on a busy one, and that is normal.
Gap up vs gap down
Most small-cap day traders scan for gaps up, because buying is the simpler side of a small cap: shorting small caps can be hard or costly, and a squeeze in a low-float stock can move fast against a short position.
Gaps down are still worth knowing about. A stock that gapped down hard on bad news is part of the morning's picture, and some traders look for a bounce from a level after a large gap down. If you want to see them, run a second scan with Gapped down % instead of Gapped up %, and keep the two lists apart: the setups traders use on one rarely carry over to the other.
Two more things change the way traders read a gap, up or down:
- The reason. A gap on a press release, an earnings report or a filing has a story the market can react to. A gap with no news can fade as quickly as it came.
- Where it opens. A gap that opens above the previous day's high, or above a price the stock hasn't seen in months, has fewer recent buyers above it waiting to sell than one that opens just under such a level.
From 30 names to 3–7: the morning watchlist
On a busy morning, a scan with the settings above can list 20 or 30 stocks. You can't watch 30 charts at the open. The work between 08:00 and 09:25 ET is cutting that list down to a watchlist of three to seven names you know well.
Traders commonly cut in this order:
- Catalyst. Keep the stocks with a clear reason for the gap. Drop the ones you can't explain.
- Volume and RVOL, again. The readings from 05:00 ET may have changed. Drop the stocks whose volume has stalled.
- The chart. On the daily chart, where does the gap sit against recent highs and lows? On the premarket chart, is the stock holding near its premarket high, or fading from it?
- Levels. For each stock left, mark the premarket high, the premarket low and the previous close. These are the levels the open will be read against.
- Spread. A stock whose bid and ask sit far apart costs you on every entry and every exit. Drop the ones you couldn't get in and out of cleanly.
What is left is your watchlist. Write one line for each name: why it is there, the levels you marked, and the setup you would trade it with. The setup many traders use on these names after the open is gap and go, covered in the gap and go strategy guide.
Common mistakes with premarket scanners
- Filters too loose. A gap filter at 3% with no volume filter returns a hundred stocks, and you end up watching the top of the list instead of the stocks with a reason to move.
- Filters too tight. A float under 2 million, a gap over 50% and an RVOL over 10 can return nothing on most mornings, and then you loosen them at 09:29, in a hurry. Set your filters the evening before and leave them alone during the morning.
- Reading early RVOL as a ranking. At 04:30 ET, a few thousand shares can show as an RVOL of 30. Check it again later, with raw volume next to it.
- Chasing the top of the list. The stock that has gapped the most is not always the best candidate. Often it has made most of its move before you see it.
- Ignoring the delay. Traderly's market data is delayed 15 minutes, so its scanner shows the premarket 15 minutes late. Use it to build and study your list and to review sessions in replay, never to time an entry.
Review yesterday's gappers in replay
The quickest way to tune your settings is to run them on mornings that already happened. In a replay, you can go back to 08:00 ET on a recent session, see what your scan listed, cut it down to a watchlist the way you would have, and then play the open to see what each name did.
A review takes about half an hour:
- Jump to the premarket of a recent session and run your scan.
- Cut the list to three to seven names, writing down why.
- Play the open and note which names gave a setup you would have taken, and which of the names you dropped moved anyway.
- Change one setting, go back to the premarket, and run it again.
After a week of these reviews, you will know what your settings miss and what they let through, which is more than any list of recommended numbers can tell you. The guide to practicing day trading has a four-week routine built on the same idea.