IMPORTANT NOTICE: Futures trading has large potential rewards, but also large potential risk . You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. There is no claim or guarantee that the following information are free of errors,including typos, program bugs, error in modeling the data, internet errors, etc.
Trade at your own risk!
If you need help with reading and using these data please visit Fading Opening Gaps 101.Trade at your own risk!
Gaps are very popular trading tools. If you do a google search on market gap, it will come up about 34,000,000 entries. Many people worked on this subject of gaps 100's of years before internet was invented. Amongst the zillions of gap researchers, Masterthegap does a very good job primarily on calculating the probability for fading the opening gap. They also cover other markets as well as ES. I have come up with some ideas in the engine behind these numbers and I think they are great ideas. I am sure that others have come up with some other great ideas to calculate these probabilities. There are virtually unlimited ways to build this engine. So don't be surprised to see various people who calculate this probabilities are coming up with different numbers. The area of market is not quite inside the domain of exact science.
If you need help with trading in general, the best place I have found so far is LBR Group headed by market wizard Linda Raschke. Beware that most other sites are purely scams.
Not a single loosing trade so far!
Yesterday's post said
"Before Gap - Based on the market structure data shown below, If ES opens between high and close of yesterday(1079.50 to 1074.75), there will be a 72% (Profit factor of 1.37) that the target of 1074.74 would be hit. However, the timing data does not support it. There is a good chance that this will work but it is too aggressive for me to trade.
After Gap - Today's calculations data does not support any After Gap play."
Recap of yesterday Action:
Before Gap: ES opened at 1075.50 in the highest probability range. I did not make any trade because I considered it too risky and the max profit would have been less than one point. However, the gap closed very quickly.
After Gap: There was no valid 2nd trade because ES did not open in a high probability zone for this trade.
My college friend, one of the distinguished scientists in US, and his family visited me from Texas on Monday. We enjoyed my eggplant stew, grilled chicken, home-made wine and long conversations.
Today's Summary:
Before Gap - Based on the market structure data shown below, If ES opens between high and close of yesterday(1078.50 to 1075.50), there will be a 74% (Profit factor of 2.37) that the target of 1071 would be hit. However, the timing data does not support it. Being a conservative trader, I will not trade this. Generally Monday and Tuesdays are the worst days for these types of setups.
After Gap - Today's calculations data does not support any After Gap play.
Today's ES pivot points:
R3 - 1089.50
Fib 1.6 - 1086
R2 - 1084
Fib 1.27 - 1081.75
Day 2 Hi - 1079.50
High - 1078.50
R1 1077.50
Open - 1075.50
Pivot - 1072.25
Close - 1071
Low - 1066.50
Day 2 LS1 - 1065.50
ow - 1062.75
S2 - 1060
S3 - 1053.50
Before Gap probabilities
Gap fading probability numbers:
Profit Target = Gap Close, Stop = 5 points.
Emini S&P Future
What are these rows and columns?
| Opening Zone | >H | H-O | O-C | C-L | All | All | ||
| Short | Short | Short | Long | Long | Longs | Shorts | ||
| PF | 1.29 | 2.37 | 1.33 | 1.09 | 0.89 | 0.97 | 1.46 | |
| PCT Prof | 56% | 74% | 62% | 58% | 52% | 54% | 64% | |
| Avg Loss | $25 | $31 | $29 | $31 | $30 | $30 | $29 | |
| Net Loss | $175 | $338 | $3,063 | $1,438 | $1,763 | $3,388 | $3,813 | |
| Loose | 7 | 11 | 105 | 47 | 59 | 113 | 132 | |
| Avg Win | $25 | $25 | $24 | $24 | $25 | $24 | $24 | |
| Net Win | $225 | $800 | $4,063 | $1,563 | $1,563 | $3,300 | $5,575 | |
| Win | 9 | 32 | 170 | 65 | 63 | 135 | 231 | |
| Avg P/L | $3 | $11 | $4 | $1 | $2 | $0 | $5 | |
| Net | $50 | $463 | $1,000 | $125 | $200 | $88 | $1,763 | |
| Total | 16 | 43 | 275 | 112 | 122 | 248 | 363 | |
The following info is based on timing:
Profit Target = Gap Close, Stop = 5 points.
Emini S&P Future
What are these rows and columns?
| Opening Zone | >H | H-O | O-C | C-L | All | All | ||
| Short | Short | Short | Long | Long | LONG | SHORT | ||
| PF | 0.46 | 0.67 | 1.34 | 1.33 | 0.80 | 1.14 | 1.05 | |
| PCT Prof | 29.41% | 52.78% | 75.65% | 78.13% | 47.37% | 67.97% | 67.19% | |
| Avg Loss | $361 | $329 | $382 | $315 | $298 | $288 | $330 | |
| Net Loss | $4,338 | $5,600 | $10,688 | $4,413 | $8,938 | $25,888 | $34,675 | |
| Loose | 12 | 17 | 28 | 14 | 30 | 90 | 105 | |
| Avg Win | $400 | $198 | $165 | $118 | $263 | $154 | $169 | |
| Net Win | $2,000 | $3,763 | $14,313 | $5,875 | $7,113 | $29,400 | $36,350 | |
| Win | 5 | 19 | 87 | 50 | 27 | 191 | 215 | |
| Avg P/L | $138 | $51 | $32 | $23 | $32 | $13 | $5 | |
| Net | $2,338 | $1,838 | $3,625 | $1,463 | $1,825 | $3,513 | $1,675 | |
| Total | 17 | 36 | 115 | 64 | 57 | 281 | 320 | |
After Gap probabilities
The following info is based on market structure:
Profit Target = 4 points, Stop = 5 points. These are gap close conditional probabilities
Emini S&P Future
What are these rows and columns?
| Opening Zone | >H | H-O | O-C | C-L | All | All | ||
| Short | Short | Short | Long | Long | Longs | Shorts | ||
| PF | 100.00 | 100.00 | 0.80 | 1.00 | 100.00 | 0.82 | 0.80 | |
| PCT Prof | --- | --- | 50% | 50% | --- | 50% | 50% | |
| Avg Loss | $0 | $0 | $250 | $250 | $0 | $254 | $250 | |
| Net Loss | $0 | $0 | $250 | $250 | $0 | $1,775 | $750 | |
| Loose | 0 | 0 | 1 | 1 | 0 | 7 | 3 | |
| Avg Win | $0 | $0 | $200 | $250 | $0 | $207 | $200 | |
| Net Win | $0 | $0 | $200 | $250 | $0 | $1,450 | $600 | |
| Win | 0 | 0 | 1 | 1 | 0 | 7 | 3 | |
| Avg P/L | --- | --- | $25 | $0 | --- | $23 | $25 | |
| Net | $0 | $0 | $50 | $0 | $0 | $325 | $150 | |
| Total | 0 | 0 | 2 | 2 | 0 | 14 | 6 |
Good luck and please direct any questions or suggestions!
Copyright © Ali Mohseni 2010 Charts are created using Tradestation software.
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