Trade Ideas identifies two fundamentally different setup types, and almost every trader mistakenly treats them the same way. Gap fill trades and momentum breakout trades look superficially similar on a chart—both involve a stock moving sharply away from a level. But the mechanics that drive them are completely opposite, which means the execution and risk management that works for one will actively sabotage the other.
A gap fill setup happens when a stock opens lower than yesterday's close (or higher, for short setups) and Trade Ideas identifies the probability that it will trade back toward the previous day's close by end of session. This is mean reversion. The setup assumes price is temporarily displaced and will gravitate back to equilibrium. These trades have specific characteristics: they work best in choppy, sideways markets where directional conviction is weak. They have defined risk—you know where they fail (they don't make it back to the gap level). They have limited upside—once the gap is filled, the trade is done.
Momentum breakout trades are the opposite. A stock breaks above a technical resistance level with volume, and Trade Ideas flags it as a potential continuation. This isn't mean reversion; it's directional conviction. The setup assumes price is moving to a new level and will keep moving. These trades work best in trending markets where participants are rotating into new positions. Their risk is harder to quantify—you don't know how far the momentum extends. Their upside is unlimited; the trade can run 5%, 10%, even 20% before reversing.
The reason traders confuse them: both generate the same kind of alert on a Trade Ideas chart. A price bar lights up. An arrow appears. An alert notification fires. The interface doesn't distinguish between "this stock is likely to revert to yesterday's close" and "this stock is about to run hard in one direction." It's your job to look at the context and figure out which one you're seeing.
The Context Reading That Trade Ideas Can't Teach You
Context is everything, and it's the part of trading that no scanner fully automates. You need to look at four things the moment an alert fires: the intraday chart structure, the overall market environment, the stock's relationship to its sector, and the order book activity.
Consider a concrete example. XYZ stock opens down 2% at $18.30 after missing earnings. The previous day closed at $18.72. A gap fill setup is obvious—the stock will probably trade back to $18.70 by end of day. But then you look at the sector. Materials stocks are getting crushed across the board, down 3.5% as a group. You look at the broader market. The S&P is down 1.2% in what's shaping up to be a capitulation day. You look at the order book and see massive selling pressure at every rally attempt.
In this context, the gap fill trade is probably a trap. Yes, the gap might get filled eventually, but it could take three days and you could lose 4% before it happens. The momentum is down, not toward equilibrium. A gap fill trade assumes stability that doesn't exist. You'd want to skip this one or take only a fraction-of-normal-size position.
Now consider a different scenario. Stock XYZ closes unchanged but consolidates for three days in a tight range. On day four, it breaks above the consolidation range with 40% above-average volume. Trade Ideas flags it as a momentum play. You check the market: S&P just bounced hard from oversold levels and is up 0.8%. The sector is rotating into tech names and XYZ is a play in that space. The order book shows clean bids all the way up—no massive resistance until 3% higher.
This is a legitimate momentum breakout setup. The context supports continuation. You might enter at the breakout level and ride it with a stop below the range, targeting that 3% resistance level.
The difference between those two scenarios isn't the chart pattern; it's the broader context. Professional traders use Trade Ideas as a pattern-finder but apply context as a filter. Retail traders use Trade Ideas as a decision-maker, which means they trade the chart without the context.
Why Your Win Rate Differs Depending on Setup Type
Track your trades separately by setup type for 30 days and you'll probably see a 15-20% difference in win rates between your best-performing category and your worst. This isn't random variance. It's a sign that you're better at one type of setup than the other, which means you should trade them differently.
A trader might win 58% of gap fill trades but only 49% of momentum breakouts. The gap fill wins are smaller on average—maybe +0.40% per win. The momentum breakout wins are larger—maybe +1.20% per win. The math still favors momentum breakouts (49% win rate × 1.20% average win beats 58% win rate × 0.40% average win), but most traders don't calculate this. They see the higher win rate on gap fills and psychologically prefer that feeling of rightness.
If you notice you're better at one type, the rational response is to configure Trade Ideas to emphasize that type. If momentum breakouts work for you, weight the momentum scanner higher and reduce the mean reversion scanner. If gap fills work, do the opposite. This is obvious in theory but traders don't do it because it requires admitting they're not good at something, which is emotionally difficult.
The performance difference often correlates with execution speed. Momentum breakouts reward fast execution. You want to be in early in the move. Gap fills are forgiving of slower execution—whether you enter at $18.35 or $18.50, you're still playing for the fill back to $18.70. If you're a slower trader, you should probably weight your Trade Ideas toward mean reversion patterns and away from momentum. If you have direct market access and can execute in 300 milliseconds, momentum is your territory.
Another pattern: traders tend to be better at gap fills when volatility is low and better at momentum breakouts when volatility is high. In low-volatility environments, moves are mean-reverting. Stocks that gap are likely to fill because the underlying reasons for the gap are often temporary. In high-volatility environments, gaps are followed by extension because the underlying reasons (major news, broad market shift) are persistent. So your win rate on these setups shifts with the volatility regime.
The professional approach is to adjust your Trade Ideas configuration dynamically. When Go to this site you notice volatility spike, dial back the mean reversion scans and emphasize momentum. When volatility compresses, do the opposite. This isn't complicated, but it requires you to actually monitor what you're trading instead of set-and-forget.
Most traders never make this distinction. They trade everything Trade Ideas sends and accept whatever win rate results. Better traders separate the two types, track them independently, and configure the system to emphasize whichever type gives them the best edge. The second approach requires an extra 20 minutes of work per week. It generates an extra 2-4% return per month on average. That math is easy.