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Opening Gap Trade


The Regular Trading Hours (RTH) opening gap trade is a well known trading setup. This trading setup is certainly something I always consider at the opening of the new RTH trading session.

Guy did an analysis of this setup in his article titled "Fading the Gap"

From his article we learn the following historical statistics from the sample period he used...
  • "On average 76% or three quarters of all gaps close at some point during RTH."

  • Gaps on Monday were the least likely to fill and Thursday gap openings the most likely.

  • Opening gaps up to 7 ES points in size were filled during the session at least 70% of the time. This probability drops off surprisingly quickly above the 7 ES point range.

Given these basic concepts as a foundation, I thought it might be helpful to use this topic for further discussion, analysis and trading ideas.
quote:
Originally posted by gapper

The opening gap is one of the best setups I have found for day trading.



Gapper ... I agree with you about the Gap Fill (trade towards yesterday's settlement). I use it as a "filter" or Bias for my trade entries. I tend not to think about it on a Monday or Friday - but T - W - Th keep it in mind.

The 6 Pt Stop that the Gap Guy uses is a bit much ... but hey ... it works. Have you come up with changes to the Gap Guy's filters (Open within the prior day's Trading Range etc.)

Thanks for kick starting this thread.
bakrob99, I agree on the stop comment. It took me a while to get comfortable with larger stops. However, once I understood Gap Guy's approach, I very much liked it and have adopted not only his probability based trading style but also used his zone concept for other intraday setups. I am working on some different enhancements to his zones for gaps, but so far have not found anything better. However, I'll always continue to strive for improvement! Here is a link to where Gap Guy discusses stop size. Some pretty interesting stuff......... http://www.thegapguy.com/blog/stops-are-overrated.html
I love open gap plays... easiest way to make money.
great gap play in the ES today. Huge rally sold near the R2 pivot to watch it gap fill and then some.WOOT!