Gap Probabilities for Friday 7/23/2010

Gap Probabilities for Friday 7/23/2010

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General Info

Yesterday's Review

Today's Forecast

Today's Raw Data

IMPORTANT NOTICE: Futures trading has large potential rewards, but also large potential risk . You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. There is no claim or guarantee that the following information are free of errors,including typos, program bugs, error in modeling the data, internet errors, communication errors, human errors, etc.

Trade at your own risk!

These Probabilities Have lead to 100% Winning Trades so far since June 2010!

Please note that the above factual statement does not mean that it is mathematically possible for this to continue for ever.  Having said that, I believe this system will help you gain remarkable advantage over random trades.

For help with using this guide visit Fading Opening Gaps 101.

For 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 scams.

H, O, C, and L refer to High, Open, Close and Low of yesterday

Yesterday's Review:

Levels and signals:
ES pivot points:;                                                                     Signals:
(based on prior day's data)                                                                (based on today's opening price)

R3:	1119.00		Before GAP		After GAP
Fib 1.618:	1100.75
R2:	1094.50
Fib 1.272:	1092.25
High:	1085.50
					SELL
Open:	1085.00
R1:	1079.00
Pivot:	1070.00
Close:	1063.75
			BUY		BUY
Low:	1061.00
S1:	1054.50
Fib 1.272:	1054.25
Fib 1.618:	1045.75
S2:	1045.50
S3:	1021.00

High Probability

Medium Probability

Aggressive

Very Aggressive

Forecast:

Before Gap
Table -1 and Table - 2 agree on a high probability long trade if the market opens in CL zone as shown in table - PS below.
Entry = Open Price
Target = Yesterday's Close Price(1063.25)
Stop Loss = 7.25 points from Entry.

After Gap

According to Table - 3, if the market opens in CL(1061-1063.25) or HO(1085.50-1085) zones and it closes the gap, then there is a good chance it will go in the same direction(the direction of closing the gap) for another 4 points. Refer to the After Gap column in Table - PS.   I will take this trade.

Entry = Close
Target = Close +- 4
Stop Loss = 7.25.

Review:

The market opened at 1078.25, in the OC zone.  We only had setups for CL and HO zones.  So no trades was triggered. 
If we had entered any trade in this area, it would have been a short trade because our target,  the close (1063.25)  was below the open.  As you see in the chart above, the market after opening at 1078.25 immediately started to move up and never looked back.  Our stop loss would have been hit in about 25 minutes.  So again these probability numbers helped me avoid a bad trade.  I feel very good when my trades are successful and I make money but I feel even better when I identify a bad trade and avoid it.

Today's Forecast:
Correction(8:00 AM Eastern Time)
I just found out that I made a mistake in my calculations last night.  I am sorry about it.  I caught it now and I don't have time to correct all the page because we have to rush for the appointment with pediatrician but I make a summary correction here:

There is no Before Gap play today.  For After Gap, if the market opens above high(1094.50) or in C-O zone(1088.50 to 1078.25) and it closes the gap (the price moves down or up to 1088.50) then I enter in the direction of the move and target 4 points (i.e. 1092.50 or 1084.50 depending on the direction).  Stop loss is 9.

Before Gap
Table -1 and Table - 2 do not agree on any high probability trades.  But we have an aggressive trade in the H-C (1094.50 - 1088.50) zone.
If the market opens in this zone:
Entry = Open price
Target = 1088.50
Stop Loss = Entry Price + 9 points

After Gap
 Table - 3 does not have any high probability areas.  So there is no After Gap setup for Friday. 

Table - PS

ES pivot points:           Signals:

(based on prior day's data)     (based on today's opening price)

R3:	1120.00		Before GAP		After GAP
Fib 1.618:	1104.75
R2:	1103.50
Fib 1.272:	1099.00
R1:	1096.00
High:	1094.50
			Short at Open
Close:	1088.50
Pivot:	1087.00
S1:	1079.50
Open:	1078.25
Low:	1078.00
Fib 1.272:	1073.50
S2:	1070.50
Fib 1.618:	1067.75
S3:	1054.00

High Probability

Good Probability

Aggressive

Very Aggressive                                                  

The Following tables are prepared daily based on more than 12 years of data.
Today's Raw Data:

Table - 1        Gap Fade Probabilities (based on Market Structure)

What are these rows and columns? 

Profit Target = Gap Close, Stop Loss = 9 points.

Opening Zone		> H	H-C	C-O	O-L	< L	All	All
		Short	Short	Long	Long	Long	Longs	Shorts
PF		0.88	1.41	100.00	0.45	0.66	0.98	1.02
PCT Prof		54%	71%	100%	38%	40%	66%	66%
Avg Loss		$283	$250	$0	$253	$254	$270	$239
Net Loss		$1,700	$1,250	$0	$1,263	$763	$22,400	$29,613
Loose		6	5	0	5	3	83	124
Avg Win		$214	$147	$38	$188	$250	$134	$128
Net Win		$1,500	$1,763	$38	$563	$500	$21,975	$30,275
Win		7	12	1	3	2	164	236
Avg P/L		$15	$30	$38	$88	$53	$2	$2
Net		$200	$513	$38	$700	$263	$425	$663
Total		13	17	1	8	5	247	360

Table - 2     Gap Fade Probabilities(based on timing)

Profit Target = Gap Close, Stop Loss = 9 points.

Opening Zone		> H	H-C	C-O	O-L	< L	All	All
		Short	Short	Long	Long	Long	Longs	Shorts
PF		2.32	1.19	1.09	0.61	0.88	1.27	1.58
PCT Prof		68%	80%	71%	42%	43%	66%	72%
Avg Loss		$285	$344	$343	$305	$213	$324	$323
Net Loss		$8,563	$5,850	$10,988	$4,575	$850	$28,175	$31,025
Loose		30	17	32	15	4	87	96
Avg Win		$316	$101	$154	$255	$250	$213	$197
Net Win		$19,888	$6,988	$11,988	$2,800	$750	$35,863	$48,950
Win		63	69	78	11	3	168	249
Avg P/L		$122	$13	$9	$68	$14	$30	$52
Net		$11,325	$1,138	$1,000	$1,775	$100	$7,688	$17,925
Total		93	86	110	26	7	255	345

Table - 3     After Gap probabilities(based on Market Structure)

Profit Target = 4 points, Stop Loss = 9 points. Conditional probabilities after the gap is filled.

Opening Zone		> H	H-C	C-O	O-L	< L	All	All
		Short	Short	Long	Long	Long	Longs	Shorts
PF		100.00	1.10	100.00	100.00	100.00	1.10	0.90
PCT Prof		100%	54%	---	100%	100%	60%	54%
Avg Loss		$0	$213	$0	$0	$0	$272	$255
Net Loss		$0	$1,275	$0	$0	$0	$17,950	$29,088
Loose		0	6	0	0	0	66	114
Avg Win		$200	$200	$0	$200	$200	$198	$194
Net Win		$600	$1,400	$0	$400	$200	$19,788	$26,063
Win		3	7	0	2	1	100	134
Avg P/L		$200	$10	---	$200	$200	$11	$12
Net		$600	$125	$0	$400	$200	$1,838	$3,025
Total		3	13	0	2	1	166	248

Copyright © Ali Mohseni 2010 Charts are created using Tradestation software.