Fading the opening gap

For my purposes the NQ gap play is already over today, and it isn't even 9:30 am.

At 3:50am EST there were 1,000+ contracts offered at 1452. That was the long entry. The event was, essentially, open of European trading at 3:00am EST. Now NQ at 1461 for US$180 per contract, less commish.

Of course it helps to live in Asia in order to trade at 3:50am, EST. :)
 
In Trade Like a Hedge Fun, James Altucher's very first technique is The Bread and Butter Trade - Playing Gaps

I quote the start of his chapter:
"The gap trade is the bread and butter trade for many day traders and hedge funds. Many day traders only play gaps. They wander into the day trading firm at 9:25 AM, coffee and New York Post in hand, settle down, look for the stocks that are gapping up or down, and then fade them."
 
I've updated the Gap League Table from my gap study for this month.

It shows that the profit from the "Raw Gap Play" in the ES made 31.00 and 31.25 points for June and July respectfully.

I'll continue to update this table at the end of each month.

4 years of data in there.

What I think is very interesting is that over the last 4 years the months of June and July have ALWAYS been profitable.

I attribute this to the fact that these months are less likely to have breakaway gap days due to summer style trading. Anybody have any different theories on why these months might be more profitable?
 
Quote from BlueHorseshoe:

The problem might be that you are trying to build a 'system.' I don't use systems, and I don't trade most 'gaps' that a system would pick up. By definition anything that can be systematized will be exploited until it is gone anyway, and is a waste of my time.

Judgement, on the otherhand, is priceless.


Did I say 'judgement'? I meant to say 'genius' :)
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The problem is his system is too simple and doesn't correctly weigh and identify enough of the variables necessary in gap trading to make it profitable. Your judgement is better than his system because, while it may not be scientifically backtested and optimized, it takes into account sufficiently more inputs that it performs better. Call it genius if you want :). Absolutely anything in this world, from solving a math equation to getting laid, can be broken down into simple steps and trading is no exception, given enough time, computer power and brains thrown at it.
 
Anyone trading the E-Mini's or any other Market that trades and logs trades overnight and purposely omits that overnight data and calls it a GAP deserves all the inconsistent profitability they get in their day-to-day trading.
 
A slightly different take on gap trading:

In the last 20 years, there have been 648 gaps in the S&P, where a gap is defined as

untraded space either above the high of one day and below the low of the next day,

or below the low of one day and above the high of the next.


Of those 648, here are the ones that did not close:


Gap # . . . Date. . . . . . low. . . high Debug data
39.00-----751203.00: . . 87.60 . .89.33 . 11.00
41.00-----751205.00: . . 86.82 . .87.84 . 11.00
60.00-----760105.00: . . 90.90 . .92.58 . .6.00
513.00----771025.00: . . 91.00 . .91.63 . 11.00
514.00----771026.00: . . 91.00 . .92.10 . .6.00
521.00----771104.00: . . 90.76 . .91.58 . .6.00
559.00----780414.00: . . 91.27 . .91.39 . .6.00
576.00----821007.00: . .126.33 . 126.80 . .6.00
585.00----871019.00: . .245.28 . 281.52 . 11.00
590.00----940729.00: . .454.93 . 459.33 . .6.00
592.00----941005.00: . .454.59 . 461.77 . 11.00
614.00---1001109.00: .1408.65 .1408.78 . 11.00
636.00---1030313.00: . .804.19 . 806.48 . .6.00
647.00---1050518.00: .1174.35 .1174.43 . .6.00

The date is a bit cryptic, the first two or three characters are the year. Years 2k and above start with an extra 1, so 1050518 is 5/18/2005. The Debug Data column indicates whether it's a gap up (6) or a gap down (11).
 
I thought that the league table showed that the last 2 months were back to back 30 pointers each - in the ES. That's not too bad a profit for a gap strategy is it not? Or does that qualify as not working?
 
Quote from TGregg:

A slightly different take on gap trading:

In the last 20 years, there have been 648 gaps in the S&P, where a gap is defined as

untraded space either above the high of one day and below the low of the next day,

or below the low of one day and above the high of the next.


Of those 648, here are the ones that did not close:


Gap # . . . Date. . . . . . low. . . high Debug data
39.00-----751203.00: . . 87.60 . .89.33 . 11.00
41.00-----751205.00: . . 86.82 . .87.84 . 11.00
60.00-----760105.00: . . 90.90 . .92.58 . .6.00
513.00----771025.00: . . 91.00 . .91.63 . 11.00
514.00----771026.00: . . 91.00 . .92.10 . .6.00
521.00----771104.00: . . 90.76 . .91.58 . .6.00
559.00----780414.00: . . 91.27 . .91.39 . .6.00
576.00----821007.00: . .126.33 . 126.80 . .6.00
585.00----871019.00: . .245.28 . 281.52 . 11.00
590.00----940729.00: . .454.93 . 459.33 . .6.00
592.00----941005.00: . .454.59 . 461.77 . 11.00
614.00---1001109.00: .1408.65 .1408.78 . 11.00
636.00---1030313.00: . .804.19 . 806.48 . .6.00
647.00---1050518.00: .1174.35 .1174.43 . .6.00

The date is a bit cryptic, the first two or three characters are the year. Years 2k and above start with an extra 1, so 1050518 is 5/18/2005. The Debug Data column indicates whether it's a gap up (6) or a gap down (11).
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Question, was this in the cash Market? If it is please tell me what single instrument you use to trade it.
 
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