Trading The Opening Gap

Laissez Faire said:
Yes.

I'd prefer not to, but maybe you could find a way to classify gaps based on their strength and 'where' the day opens? If you spend a few weeks thinking on it I'm sure you'll discover something.

Some quick numbers.

If we look at all + gaps without any further filtering, 49,2 % close fully.

If we're less strict and accept within 2 points as a fill, we get 57,7 % of + gaps closing.

To the downside, the number is 52,4 % for a full close. Reflecting the bullish nature of the markets.

From these numbers alone it's clear that merely fading a gap is a stupid idea.

You could just simplify all this and merely pay attention to the prior Close. If we're moving towards it, generally, it's a good target. But if we're moving away from it - well... :)



I know some use the 16:15 close, but regular trading hours for US Equities are 09:30-16:00. So I've always used that one.
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What data set are you basing that off?
 
SunTrader said:
Don't take my word for it. Google. You might find one or two who don't use 415pm ET close - out of 1000's of hits. I like to be contrarian but not when it doesn't make sense to be.
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Not really interested in debating it. I just said what I use and why. I found the numbers to be statistically significant and that's sufficient for me. :)

I just googled and one of the first pages I found on gaps was this one:

https://www.simplertrading.com/trading-the-gaps/

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Laissez Faire said:
Not really interested in debating it. I just said what I use and why. I found the numbers to be statistically significant and that's sufficient for me. :)

I just googled and one of the first pages I found on gaps was this one:
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Yes John Carter who I referenced previously, does say in that image to match regular stock trading session, which btw is an except from a SFO Magazine article that I have still (Gaps Force Players to Show Their Hands) from January '04. But he also says in his book 2 years later Master The Trade (2006), which I have as well "I first set up a special intraday gap chart that starts collecting data at 9:30am Eastern and stops at 4:15pm Eastern. This is so I can view the gaps. These gaps won't appear on charts that carry 24 hours worth of data or as regular session data on futures market."

Think he either forgot he changed it up or believes like yourself it doesn't matter.

Whatever works ... works. :thumbsup:
 
Tall Mike said:
I am stuck as far as trying to develop more parameters on how to put together a day trading strategy around this.
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I suggest your read "The Compleat Guide to Day Trading Stock" by Jake Bernstein, it will show you a few techniques for trading gaps.
 
Tall Mike said:
Hi guys,

Does anybody here use gap openings in their trading?

I was trying to do some research into developing a strategy around this. From what I can see so far, it looks to me that most gaps do close, however, I am stuck as far as trying to develop more parameters on how to put together a day trading strategy around this.

Do any more experienced traders have any advice on this?

Thank you in advance!
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If gaps or missing the gaps bother you, then learn to hold stuff overnight. Use spreads or options if bothered by outright position. The gap can be your friend or your foe but day trading the gap is very dangerous. You might want to wait for a pullback and go with the trend but sometimes the pullback does not happen that day, it may happen NEXT day! If you fade the opening gap you have more balls than the brain... But it might work. Good luck!
 
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