Technical Analysts-- Are Gaps Really The Best TA Pattern?

EsKiller said:
In regards to the ES, I will agree. Anytime the market opens out of value, there is trade potential there to catch a good runner in either direction.
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Have you found that going with the gap up or down is more effective than fading the gap?
 
Ya know surf..., if I didn't think you were baiting us "TA dolts" - once again

I would give you a thought out response

However..., I don't want it shoved back in my face.., nor do I wish to spend the time/ energy defending what I know works


I will say..., within your link's post... exist glaring inaccuracies..., and omissions - regarding gaps

Also - there are no guidelines provided on how to trade them



RN
 
"Some technical traders strictly trade gaps. They are truly that powerful!"

Just Talk without any statistics. If you do the statistics for gaps you'll find out that the expected return is exactly 0.
 
marketsurfer said:
This guy seems to think so---

http://tradingtips.com/daily/technical-analysis/ultra-accurate-ta-pattern/

Any thoughts?

surf
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Yes, don't believe everything you read.

Most writers, write not trade. Usually vague and incomplete with a minimal understanding, or worse yet they just regurgitate what they heard or read elsewhere. A very "telling" pattern. "Maybe if you had a grasp on pattern recognition, you would understand".

Gaps are TA tools like anything else, on their own they have minimal value. As RN pointed out upon statistical analysis profitable trading methods exist, fade or continuation. When they coincide with other "TA" events, they are much more powerful. Without the research they are as useful as a coin toss.
 
ronblack said:
"Some technical traders strictly trade gaps. They are truly that powerful!"

Just Talk without any statistics. If you do the statistics for gaps you'll find out that the expected return is exactly 0.
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Ron,

Does this hold true for every pattern in every time frame? surf
 
marketsurfer said:
Have you found that going with the gap up or down is more effective than fading the gap?
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Surf, there are price behaviors around the open that dictate whether the odds are more favorable to trade with the gap rather than fading it. A firm such as Pristine provides training for trading gaps or you can study the price behavior during the opening 10-30 minutes, the longer term price environment (daily/weekly chart), and discover the "tells" the market offers with regard to the longer term direction following an opening gap.
 
many years ago, lumber gapped limit up one day. Some went short. Then it gapped limit up again next day. Some more went short. Then it gapped again limit up next day. Some shorts when bust and some other went short. To make a long story short (literally) it gapped limit up 20 days in a row and all shorts were busted. This is your gap lesson today.
 
ronblack said:
... If you do the statistics for gaps you'll find out that the expected return is exactly 0...
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I doubt it is EXACTLY zero.

And then the question is "Is it different enough from zero and always skewed one way enough to be interesting?".

And then "Can gaps be filtered in any way to produce a distribution that is even more skewed?"
 
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