Fading the gap

[zorrosg]

I have read about this trading style of fading the gap, and before that I had also noticed shares which gap up at the open of the trading day do often retrace back down.
What would be the main things to look out for when attempting to do this, and how do we make it a high probability trade, and what type of stop losses are typically used in this setup? Also, how many of you regularly to this type of trade, and do you find it to be a consistent winner?

 

[science_trader]

Quote from zorrosg:

I have read about this trading style of fading the gap, and before that I had also noticed shares which gap up at the open of the trading day do often retrace back down.
What would be the main things to look out for when attempting to do this, and how do we make it a high probability trade, and what type of stop losses are typically used in this setup? Also, how many of you regularly to this type of trade, and do you find it to be a consistent winner?

Download the data, backtest fading strategies on them and find out !!!

I'm always so impressed to see how lazy people can be.

 

[NihabaAshi]

Quote from zorrosg:

I have read about this trading style of fading the gap, and before that I had also noticed shares which gap up at the open of the trading day do often retrace back down.
What would be the main things to look out for when attempting to do this, and how do we make it a high probability trade, and what type of stop losses are typically used in this setup? Also, how many of you regularly to this type of trade, and do you find it to be a consistent winner?

You can use ET search menu to find past topics on this because there were several threads devoted to this topic by many different ET members.

In fact, one particular thread by the ET member BrandonF had about +30 pages long on this topic and Gap Fading seemed to be a major part of his trade methodology.

http://www.elitetrader.com/vb/search.php?s=

Use keywords like Gap Fading.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term