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Trade at your own risk!
If you need help with reading and using these data please visit Fading Opening Gaps 101.Trade at your own risk!
Gaps are very popular trading tools. If you do a google search on market gap, it will come up about 34,000,000 entries. Many people worked on this subject of gaps 100's of years before internet was invented. Amongst the zillions of gap researchers, Masterthegap does a very good job primarily on calculating the probability for fading the opening gap. They also cover other markets as well as ES. I have come up with some ideas in the engine behind these numbers and I think they are great ideas. I am sure that others have come up with some other great ideas to calculate these probabilities. There are virtually unlimited ways to build this engine. So don't be surprised to see various people who calculate this probabilities are coming up with different numbers. The area of market is not quite inside the domain of exact science.
If you need help with trading in general, the best place I have found so far is LBR Group headed by market wizard Linda Raschke. Beware that most other sites are purely scams.
Not a single loosing trade so far!
Yesterday's post said
"Before Gap Play - Based on the market structure and timing data shown below, If ES opens between open and close of yesterday(1070.25 to 1082.25), I will go short with a stop of 5 and a target of close adjusted based on pivot points. Other situations are not appealing. This is not one of the best set ups, but it is good eno
ugh for me to trade.After Gap Play - If ES opens between high and open of yesterday(i.e. between 1083.75 and 1082.50) and then closes the gap any time during the day, then there is 74% chance(with a profit factor of 2.37) that it will go up for additional 4 points."
Recap of yesterday Action:
ES opened at 1072.75 in the range for "Before Gap Play". I went short at the open and hit my target in a few minutes. The potential was 2.5 points but I lost two ticks because of my hesitation.
There was no valid 2nd trade because ES did not open in a high probability zone for After Gap Play.
Today's Summary:
Before Gap - Based on the market structure data shown below, If ES opens between high and close of yesterday(1079.50 to 1074.75), there will be a 72% (Profit factor of 1.37) that the target of 1074.74 would be hit. However, the timing data does not support it. There is a good chance that this will work but it is too aggressive for me to trade.
After Gap - Today's calculations data does not support any After Gap play.
Today's ES pivot points:
R3 - 1098.75
Fib 1.6 - 1089.75
R2 - 1089
Fib 1.27 - 1084
Day 2 Hi - 1083.75
R1 1082
High - 1079.50
Close - 1074.75
Open - 1072.75
Pivot - 1072.50
Day 2 Low - 1066.50
S1 - 1065.25
Low - 1062.75
S2 - 1055.50
S3 - 1048.50
Before Gap probabilities
Gap fading probability numbers:
Profit Target = Gap Close, Stop = 5 points.
Emini S&P Future
What are these rows and columns?
| Opening Zone | H | HC | CO | OL | L | All | All | |
| Short | Short | Long | Long | Long | Longs | Shorts | ||
| PF | 0.58 | 1.37 | 0.59 | 1.08 | 0.61 | 0.79 | 1.06 | |
| PCT Prof | 48% | 72% | 59% | 55% | 45% | 57% | 64% | |
| Avg Loss | $263 | $242 | $202 | $230 | $340 | $243 | $251 | |
| Net Loss | $6,575 | $3,150 | $4,250 | $2,300 | $2,038 | $10,950 | $11,538 | |
| Loose | 25 | 13 | 21 | 10 | 6 | 45 | 46 | |
| Avg Win | $166 | $127 | $84 | $207 | $250 | $144 | $150 | |
| Net Win | $3,825 | $4,325 | $2,525 | $2,488 | $1,250 | $8,625 | $12,175 | |
| Win | 23 | 34 | 30 | 12 | 5 | 60 | 81 | |
| Avg P/L | $57 | $25 | $34 | $9 | $72 | $22 | $5 | |
| Net | $2,750 | $1,175 | $1,725 | $188 | $788 | $2,325 | $638 | |
| Total | 48 | 47 | 51 | 22 | 11 | 105 | 127 | |
The following info is based on timing:
Profit Target = Gap Close, Stop = 5 points.
Emini S&P Future
What are these rows and columns?
| Opening Zone | H | HC | CO | OL | L | All | All | |
| Short | Short | Long | Long | Long | Longs | Shorts | ||
| PF | 0.88 | 0.86 | 1.15 | 0.81 | 1.07 | 1.05 | 0.89 | |
| PCT Prof | 57% | 82% | 78% | 68% | 49% | 64.11% | 61.01% | |
| Avg Loss | $246 | $335 | $322 | $313 | $231 | $274 | $262 | |
| Net Loss | $14,750 | $1,675 | $5,150 | $2,188 | $5,088 | $24,363 | $32,525 | |
| Loose | 60 | 5 | 16 | 7 | 22 | 89 | 124 | |
| Avg Win | $161 | $63 | $106 | $118 | $260 | $161 | $149 | |
| Net Win | $13,050 | $1,438 | $5,925 | $1,763 | $5,463 | $25,588 | $28,850 | |
| Win | 81 | 23 | 56 | 15 | 21 | 159 | 194 | |
| Avg P/L | $12 | $8 | $11 | $19 | $9 | $5 | $12 | |
| Net | $1,700 | $238 | $775 | $425 | $375 | $1,225 | $3,675 | |
| Total | 141 | 28 | 72 | 22 | 43 | 248 | 318 | |
After Gap probabilities
The following info is based on market structure:
Profit Target = 4 points, Stop = 5 points. These are gap close conditional probabilities
Emini S&P Future
What are these rows and columns?
| Opening Zone | H | HC | CO | OL | L | All | All | |
| Short | Short | Long | Long | Long | Longs | Shorts | ||
| PF | 100.00 | 0.80 | 0.79 | 100.00 | 100.00 | 0.82 | 0.80 | |
| PCT Prof | --- | 50% | 50% | --- | --- | 50% | 50% | |
| Avg Loss | $0 | $250 | $254 | $0 | $0 | $254 | $250 | |
| Net Loss | $0 | $500 | $1,525 | $0 | $0 | $1,775 | $750 | |
| Loose | 0 | 2 | 6 | 0 | 0 | 7 | 3 | |
| Avg Win | $0 | $200 | $200 | $0 | $0 | $207 | $200 | |
| Net Win | $0 | $400 | $1,200 | $0 | $0 | $1,450 | $600 | |
| Win | 0 | 2 | 6 | 0 | 0 | 7 | 3 | |
| Avg P/L | --- | $25 | $27 | --- | --- | $23 | $25 | |
| Net | $0 | $100 | $325 | $0 | $0 | $325 | $150 | |
| Total | 0 | 4 | 12 | 0 | 0 | 14 | 6 |
Good luck and please direct any questions or suggestions!
Copyright © Ali Mohseni 2010 Charts are created using Tradestation software.
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