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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 day trading

When I started that gap study I had about 3 questions that I wanted answered. I finished it answering about 20 questions and accumulating another 10,000 questions. The number of stats and permutations you can do is unlimited. Your question Do the statistics change if we open OUTSIDE the previous days range? I believe that I answered on one of those pages, I called that type of gap an extreme gap - if I remember correctly.



I found that table on page 18 of your study [url]http://www.mypivots.com/articles/articles.aspx?artnum=43&page=18[/url]

I suggest a hybrid study combining this gap outside the prior day's range study with the frequency table you generated for each size gap. The hybrid study would produce two mutually exclusive frequency tables, one for gaps inside the prior day's range and one for gaps outside the prior days range. Think of it as a way of further differentiating the results in the original frequency table.
Thanks DT ! This article should be a required read for all S&P day traders....Great stuff....Does this mean you can't tell me if the gap will fill when it happens on the second Monday of the month during the second month of year when the moon is full? Only kidding...I agree that the combinations could be endless...Fantastic research though!!
quote:
When I started that gap study I had about 3 questions that I wanted answered. I finished it answering about 20 questions and accumulating another 10,000 questions. The number of stats and permutations you can do is unlimited. Your question [i]Do the statistics change if we open OUTSIDE the previous days range? I believe that I answered on one of those pages, I called that type of gap an extreme gap - if I remember correctly.

As a note for further study and to be thorough, the gap outside the prior days range is the setup for Larry William's "Oop's trade".
What is Larry William's OOP's Trade?

I really enjoyed doing that gap study and started doing a far more thorough one which I never finished because there was so much that I wanted to do with it. There will come a point however that I will finish that second in depth study and combine it with some other research that I'm doing.
quote:
Originally posted by day trading

What is Larry William's OOP's Trade?



Looking at the daily chart the Oop's trade rules are as follows:

If today's open is below yesterday's Low, then buy if price crosses above yesterday's low

If today's open is above yesterday's High, then sell if price crosses below yesterday's high



Very similar to the 80% rule, just using the daily high/low rather than the VAH/VAL.

As a side note, the Oop's trade works well on stocks for an easy entry into an intra-day position or even swing trade.
According to the daily notes page [url]http://www.mypivots.com/dn/?symbol=58[/url], Friday's Close in the ES was 1330.25, and Friday's High was 1343.75. Also, the globex high is 1336.50.

With 5 minutes until the RTH open: A flat open or possible weak gap up open is indicated in the ES, and a stronger 8-10 point gap up on the Yahoo news is indicated for the NQ

NQ gap has finally filled (to the tick) after a considerable chop zone just above Friday's close. NQ seems reluctant to give much ground to the downside this morning.

ES gap was a bit too narrow to be tradable for me.

ER2 gap filled almost immediately after the RTH open, which was an early signal the ER2 was going to be the relatively weaker index this morning.
Thanks pt_emini. Very simple rule. And relatively easy to test in the next gap study that I do. It will definitely be on the list.
Looks like another gap as I type....I have/had a key at 1351 but missed the short against it...but my plan is selling...next upside keys are at 1355...then 62 - 65....on downside I;ll be watching what happens near 45.50 ( critical to get below)...then 39 and 34.50

Seems like this breakout from consolidation happened to early...I'm starting at 49 even for shorts...hoping that we fill in some more of that consolidation of the past 3 days....otherwise I'll be losing today...
trying again from 51.25....key number...runners got stopped after the 45.50 held...last post as this should be about trade ideas....not trades...sorry PT...Ticks holding up fairly well which is a concern for this short
great gap play in the ES today. Huge rally sold near the R2 pivot to watch it gap fill and then some.WOOT!