Gap Probabilities for Tuesday 7/20/2010

Gap Probabilities for Tuesday 7/20/2010

Please Refer This site to those who may benefit from it.  Thanks! 

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, communication errors, human errors, etc.

Trade at your own risk!

These Probabilities Have lead to 100% Winning Trades so far since June 2010!

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.

H, O, C, and L refer to High, Open, Close and Low of yesterday

Yesterday's Forecast and Review

Yesterday's Forecast:
Before Gap

According to Table -1, except for zone H-O, every other zone is great for gaps in both direction specially if the market opens below the open of Friday(1085.75).  I will definitely take the trade in C-L zone(1063.25 to 1059) because this is the area that Table -2 also agrees with Table - 1.  Because the probabilities are great in the O-C and L zones, I may also take some trades in these zones.
Stop is 9.

After Gap
According to Table - 3, if the market opens above the high (1086.50 ) and it closes the gap at 1063.25, then there is descent probability that the market will continue going down another 4 points.  The problem with this setup is that the sample size is very small and not trustable.  I will not take this trade.
Stop is 9.

Yesterday's Review:

Before Gap- ES opened at 1065.25 in O-C zone.  I went short at the open and placed my target at one tick above the close(1063.25).  Unlike our usual setups, this time it took about 40 minutes to reach the target.  In the research (Gaps VS Time) I showed that after 40 minutes, news and other factors overwhelm our initial probability advantage.  So I was about to start managing the trade outside the gap concept when it hit my target.

After Gap -  No trade.

Today's Forecast Summary:

Before Gap
Table -1 and Table - 2 have nothing in common.  We do not have any of highest probability trades.  We have a medium probability in in the O-C zone (1065.25 to 1064.25) which has only 1 point potential profit and it is not tradable.
Stop Loss = 5.

After Gap
According to Table - 3, we have a very aggressive trade (because of small sample size) in C-L zone (1064.25 to 1057).  If the market opens in this zone and the closes the gap (1064.25) then there is a good chance it will go up another 4 points. I will not take this trade.
Stop Loss = 5.

Today's Data: 

ES pivot points:           Signals:
(based on prior day's data)     (based on today's opening price)

R3:	1092.00
Fib 1.618:	1079.75
R2:	1078.00
Fib 1.272:	1074.75
R1:	1071.00
High:	1071.00
				SELL
Open:	1065.25
				SELL
Close:	1064.25
Pivot:	1064.00
Low:	1057.00
				BUY
S1:	1057.00
Fib 1.272:	1053.25
S2:	1050.00
Fib 1.618:	1048.25
S3:	1036.00

High Probability

Medium Probability

Aggressive

Very Aggressive                                                  


 

Table - 1        Gap Fade Probabilities (based on Market Structure)

What are these rows and columns? 

Profit Target = Gap Close, Stop Loss = 5 points.

Opening Zone		> H	H-O	O-C	C-L	< L	All	All
		Short	Short	Short	Long	Long	Longs	Shorts
PF		4.00	2.53	0.89	0.36	1.47	0.79	1.06
PCT Prof		80%	75%	73%	56%	67%	57%	64%
Avg Loss		$250	$250	$188	$250	$341	$243	$251
Net Loss		$250	$1,000	$563	$1,000	$1,363	$10,950	$11,538
Loose		1	4	3	4	4	45	46
Avg Win		$250	$210	$63	$73	$250	$144	$150
Net Win		$1,000	$2,525	$500	$363	$2,000	$8,625	$12,175
Win		4	12	8	5	8	60	81
Avg P/L		$150	$95	$6	$71	$53	$22	$5
Net		$750	$1,525	$63	$638	$638	$2,325	$638
Total		5	16	11	9	12	105	127

Table - 2     Gap Fade Probabilities(based on timing)

Profit Target = Gap Close, Stop Loss = 5 points.

Opening Zone		> H	H-O	O-C	C-L	< L	All	All
		Short	Short	Short	Long	Long	Longs	Shorts
PF		0.46	0.67	1.34	1.33	0.80	1.14	1.05
PCT Prof		29%	53%	76%	78%	47%	68%	67%
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

Table - 3     After Gap probabilities(based on Market Structure)

Profit Target = 4 points, Stop Loss = 5 points. Conditional probabilities after the gap is filled.

Opening Zone		> H	H-O	O-C	C-L	< L	All	All
		Short	Short	Short	Long	Long	Longs	Shorts
PF		100.00	0.47	1.05	1.39	0.63	1.05	1.45
PCT Prof		100%	38%	50%	67%	45%	57%	63%
Avg Loss		$0	$255	$191	$288	$267	$256	$237
Net Loss		$0	$1,275	$763	$288	$1,600	$6,650	$7,588
Loose		0	5	4	1	6	26	32
Avg Win		$200	$200	$200	$200	$200	$200	$200
Net Win		$600	$600	$800	$400	$1,000	$7,000	$11,000
Win		3	3	4	2	5	35	55
Avg P/L		$200	$84	$5	$38	$55	$6	$39
Net		$600	$675	$38	$113	$600	$350	$3,413
Total		3	8	8	3	11	61	87

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