Gap Probabilities for Monday 7/12/2010

Gap Probabilities for Monday 7/12/2010
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!


These Probabilities Have lead to 100% Winning Trades so far!
Please note that the above factual statement does not mean that it is mathematically possible for this to continue for ever.  Having said that, I believe this system will help you gain remarkable advantage over random trades.


For help with using this guide visit Fading Opening Gaps 101.
For 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 scams.

Yesterday's Forecast and Recap
Yesterday's Forecast:
Before Gap
Both market structure and timing data shown in Table-1 and Table-2 below agree that if the market opens above close of yesterday (1067) , there is a 69% probability of downward pressure to close the gap.  I will take this trade.  If the up gap is extra ordinary large(+10), I will be cautious and may pass on it.
After Gap
 According to Table - 3, if the market opens above the high (1068.50 ) or below the low (1054) and closes the gap, it is likely that the price continues in the same direction for an additional 4 points.

Yesterday's Recap:
Before Gap - ES opened at 1066.25,  Below the prior day's high of 1068.50 and not in a zone with high probability.  So no trade triggered.
After Gap - No trade triggered..
Additional Comment: Don't be disappointed that this system has trade-able setups only for some days and even if we do have a setup, it may not triggered because the market does not open in a triggering zone.  I expect to see only one or two trades a week and perhaps 5 or 6 per month.  This is like digging gold and diamond hidden in the middle of tons of trash.
Today's Forecast Summary:
Before Gap
Table -2 does not support any gap play for Monday.  But Table -1 has strong values for opening above close and below the high of Friday(1071.75 to 1075.00).  I will take this trade if the gap is equal or more than 1 point.  Even though this is not supported by timing, the chance of winning is 81% with PF of 1.77 and there is no pivot points between the close and the high.
After Gap
 According to Table - 3, if the market opens above the high (1075 ) or below the low (1064.25) and closes the gap, it is likely that the price continues in the same direction for an additional 4 points.  I will take this trade also.

Today's Data:

ES pivot points:
Table - 1        Gap Fade Probabilities (based on Market Structure)
Profit Target = Gap Close, Stop = 5 points.

Opening Zone
> H H-C C-O O-L < L All All


Short Short Long Long Long Longs Shorts
PF
1.34 1.77 1.24 0.58 1.25 1.13 1.51
PCT Prof
69% 81% 70% 47% 58% 66% 74%
Avg Loss
$298 $226 $213 $266 $256 $225 $276
Net Loss
$18,750 $5,875 $16,600 $4,250 $2,813 $25,188 $26,188
Loose
63 26 78 16 11 112 95
Avg Win
$178 $93 $113 $175 $235 $128 $145
Net Win
$25,213 $10,413 $20,638 $2,450 $3,525 $28,438 $39,538
Win
142 112 182 14 15 222 273
Avg P/L
$32 $33 $16 $60 $27 $10 $36
Net
$6,463 $4,538 $4,038 $1,800 $713 $3,250 $13,350
Total 
205 138 260 30 26 334 368


Table - 2     Gap Fade Probabilities(based on timing)
Profit Target = Gap Close, Stop = 5 points.

Opening Zone > H H-C C-O O-L < L All All
Short Short Short Long Long Longs Shorts
PF 0.88 0.86 1.15 0.81 1.07 1.05 0.89
PCT Prof 57% 82% 78% 68% 49% 64% 61%
Avg Loss $246 $335 $322 $313 $231 $274 $262
Net Loss $14,750 $1,675 $5,150 $2,188 $5,088 $24,363 $32,525
Loose 60 5 16 7 22 89 124
Avg Win $161 $63 $106 $118 $260 $161 $149
Net Win $13,050 $1,438 $5,925 $1,763 $5,463 $25,588 $28,850
Win 81 23 56 15 21 159 194
Avg P/L $12 $8 $11 $19 $9 $5 $12
Net $1,700 $238 $775 $425 $375 $1,225 $3,675
Total  141 28 72 22 43 248 318


Table - 3     After Gap probabilities(based on Market Structure)
Profit Target = 4 points, Stop = 5 points. Conditional probabilities after the gap is filled..

Opening Zone
> H H-C C-O O-L < L All All


Short Short Long Long Long Longs Shorts
PF
1.30 1.10 0.95 0.34 4.85 0.93 1.19
PCT Prof
64% 56% 55% 30% 88% 55% 60%
Avg Loss
$265 $228 $237 $252 $250 $239 $246
Net Loss
$11,150 $11,638 $23,188 $1,763 $250 $26,500 $24,313
Loose
42 51 98 7 1 111 99
Avg Win
$194 $197 $184 $200 $173 $183 $195
Net Win
$14,525 $12,788 $21,938 $600 $1,213 $24,563 $28,913
Win
75 65 119 3 7 134 148
Avg P/L
$29 $10 $6 $116 $120 $8 $19
Net
$3,375 $1,150 $1,250 $1,163 $963 $1,938 $4,600
Total 
117 116 217 10 8 245 247


Good luck and please direct any questions or suggestions!

Copyright © Ali Mohseni 2010 Charts are created using Tradestation software.















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