ES Gap Fill Daily Journal July 2010

V

vieiradan

System: Trade the ES Gap with core edge being Master the Gap daily gap fill data. Secondary edges are trend analysis on daily interval, Fibonacci's and anecdotal opinions.

Size: 3-6 contracts.

Broker: IB

Platform: NinjaTrader 6.5, BracketTrader backup

Charts: ThinkOrSwim, backup NinjaTrader (IB data feed)

Here I will chronicle my morning gap fill trade, position size, reasons for trade/no trade, and screenshot p&l.

Any comments or opinions would be much appreciated!!!
 
No trade for me today. The data isn't supportive. (current trade 1029.25).

I will consider this trade if market opens below 1026 even, with a 6.75 pt stop. Target 1014.50. 2 contracts (half size).

I very rarely vary my entry size. It's either a good trade or bad trade for me, that fits my personality. There are more than enough good trades in the markets that I don't feel any need to cut my size in order to justify a poor setup.

With that said, the data under 1026 is marginally good and the risk to reward is outstanding for this type of trade.
 
I would have been stopped on this trade, so it is a success that I did not take it.

As with any gap fill system, it is also preferable for the gap to *not* fill. Which did not happen today.

Anecdotally, we've seen this perhaps 5 (or more times) since June (start of summer doldrums for me) where monster gaps close in late day action. My initial assumption was that liquidity was drying up late in the day causing positions to get drifted against. However, looking at a 60m trading-hours-only chart volume in the last hour has been equal to and in some cases exceeding the first.

The summer stretches any system to it's limits, mostly out of shear boredom. This summer is different though. This market feels like a paper kite in the wind.

One thing I am considering is weighting my contracts on days after unfilled gaps, which have a 85% end of day fill rate. However, this would not influence my decision to trade/no-trade, only the data does.

More to follow, this morning (Wednesday) gap looks promising (trade is 21.50, low of 16.25). Though anecdotally (again), I've noticed very good price action during GLOBEX with a noticeable drift towards the gap around 5-6 am. There have been several (perhaps 10) nice gaps that have been opened, 6-10 point range only to drift back and open completely flat or go through the 4:15 settle and open on the other side.
 
Data looks good for both up gaps and down gaps. I am taking this trade.

We closed the nice size gap during GLOBEX and it looks like we will open flat. No big surprise there.

My stop will be 7.5 pts (30 ticks) today. My tgt with be the ES settle @ 1024.25. I will front run this by 1 tick.

Contract size: 2 contracts (this will be my standard size, I will weight myself to 4 contracts on days w/ supportive data and a previous days unfilled gap).
 
Stopped today, -7.5 pts ES. Less than ideal fill, however obviously made no difference.


2010-07-08_0411.png


Short covering + buy program = range expansion north. I can't imagine having a retirement fund and being on that doorstep or past it and watching my quarterlies. Unhealthy market.

Data for tomorrow also looking good for both up and down gaps within certain parameters. I will likely take this gap with 4 contracts.
 
Took the trade today, data was marginally good (exactly on my minimum number). Since this was the day after a unfilled gap, there was a 80-85% this gap would fill by end of day (though not necessarily with my stop)

Stop 7 pts. Front ran the fill by a tick in order to get filled when 59.25 traded.

I expect the market to flush down to 56, and then perhaps even a pivot test 50 area. But that is totally subjective, I am done for the day.

We could see a "watch paint dry" type day tomorrow (Friday), after noon EST.

2010-07-08_1059.png
 
Quote from vieiradan:

Since this was the day after a unfilled gap, there was a 80-85% this gap would fill by end of day
More...

I was wondering where you got that data? :cool:
 
From Scott Andrews, @ master the gap. I am not sure of the exact duration but if I remember correctly, it's ES, and 7 yrs data.

Though may have been SPY & 12 yrs.

One note; this is not his trading plan. It's mine. Nor his particular style or usage of the data and in no way reflects on him or his service. You would have to contact him for the exact data.
 
Damn, you bruised my ego... :)

Quote from vieiradan:

From Scott Andrews, @ master the gap. I am not sure of the exact duration but if I remember correctly, it's ES, and 7 yrs data.
More...

I thought I came up with it first and posted it here about 4 years ago:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=75045&highlight=pekelos+2nd+gap+rule

I never heard of Scott Andrews, I came up with the observation by myself... I got about 90% probability, pretty much the same as his...

The thing about patterns and repetitious rules is that if they really work, more than one person recognizes them.
 
Looks like no trade today or a very small gap, mkt is very flat. Both up gap or down gaps within 2 pts I will take with a 6.75 pt stop.

If market looks slow, I'm cutting out of here in time for an early lunch.
 
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