Fading the Gap

J

Jdesey

this is the only strategy I have used long term that has produced consistent returns. It is simple. I look for big movers premarket to the upside vs. their close the previous day. Using some simple indicators I buy puts when the ticker rolls over. You can do the opposite with those that are down vs. their previous close and go long. I exit by the close of the session so this is a day trade strategy. About 25% of the time I will hold overnight.

I have seen numerous articles that quote backtested results of a 70% success rate with the fade strategy. Personally I have achieved a 68% win rate so I am very pleased with that.

has anyone else used the fade strategy? comments?
 
oops... meant ticker rolls over. I use awesome oscillator. I look for a cross over below the zero line on a five minute chart. that is my entry. same for exit, a cross over the zero line. Now as to spreads...yes spreads can be nasty especially in the first 30 mins for options, that works it way out as volume picks up on the near money strikes. I do not trade the weekly's unless it is a contract with massive volume like AAPL. yesterday I faded QNGY for a 24% profit. It had a 100% overnight move from $4 to $8 ish... I entered at $5.06, sold last 10 mins of options trading. I bought the March 18 monthly puts for $5 strike..

Capture.PNG
 
I have found that small gaps, .5-1, often continue, while larger gaps esp. >$2 will fill.

Another common pattern I trade is to buy after a gap up fills to prior day's high and then pivots.
 
Jdesey said:
this is the only strategy I have used long term that has produced consistent returns. It is simple. I look for big movers premarket to the upside vs. their close the previous day. Using some simple indicators I buy puts when the ticker rolls over. You can do the opposite with those that are down vs. their previous close and go long. I exit by the close of the session so this is a day trade strategy. About 25% of the time I will hold overnight.

I have seen numerous articles that quote backtested results of a 70% success rate with the fade strategy. Personally I have achieved a 68% win rate so I am very pleased with that.

has anyone else used the fade strategy? comments?
More...

do you still do this?
 
You must log in or register to reply here.
Back
Top