ES EMINI Trading - The gap and others

[Pat494]

Short @1171.75. First Target filled.

Aversano
I don't understand why you went short yesterday. Please explain.
Wednesday close was 1174.2
Thursday open was 1172.7
To fill the gap surely you should have been long ?

 

[mslcwt1]

aversano, Pat494, et al - -

Spent a few minutes this evening reviewing the "open/close" relations which included the "H" contract back to the first of the month or so.

The relation between what the price action does after the open and the gap seemed random.

Some days the gap filled.

Other days it didn't.

Some days it filled partially.

Of course, some days there was no gap.

My concern is how do you pick the day the gap fills?
I purchased a system that used a method once the gap filled to take some profit on the subsequent move once price moved back to the previous close. This has a sort of built in safety valve in that if the price didn't move back to the previous close, you didn't get in.

Not sure how to approach this "gap trade"...

Included an image of my attempt to go "no indicators" and only look at price & volume, along with "time and sales". Still have a MA. Included a few notes. Of course, the Time & Sales data scrolls along and is not included. I did catch the last move of the day for 1 3/4 pts. Clearly, left a LOT on the table...

Thoughts / comments / jokes

 

[robster970]

This month has not been good for gap closures - look over the last 6 months. There is little statistical significance in only a month's worth of data. Basically you should come up with a method you feel comfortable with that you should execute without any sense of selection. Using discretion on gaps does not generally work imo.

Looked at your chart - what is the volume at EoD telling you?

Also you could play for far bigger moves than you are doing but that involves taking on more risk than you are doing too. 0.5pt stops are tiny on an instrument that is generally quite volatile.

If you're going to do that, T&S and reading that correctly is your most valuable timing mechanism IMO. AV might have a more informative view on this than me - I'm rubbish at T&S.

 

[mslcwt1]

robster970 -

As my son would say, EoD had uber volume... It was ungawdly, eh? Being a bit too cautious. Trying to get the feel for the naked chart

Appreciate the comments on the 1/2 pt stop. That's one of my failings, I have the tendency to move my stops as the trade goes south. So, I am attempting to find a stop value that is a bit tight but doesn't kick me out of to many trades. I noticed that when a run takes off, it doesn't back up very often or very much. That stop was also behind the previous price extremes which seemed to be a viable stop value. If you think increasing would be appropriate, I'll take a look at it.

My review of the gap data left me a bit confused. I think I need to reread some of the previous comments. I must be leaving out some of the details. aversano seems to have a good method but I was a bit uneven, as your T&S skills, on looking for a consistent application of the gap method. Something to do this weekend while the market is turned off.

Thx!

 

[robster970]

Each to their own for stops. A good entry on say 2pts stop yesterday could have netted you a nice 10pt short - it never quite works out like that but that's what I'm trying to say instead of 'nickel & diming' all day.

I've annotated your chart with a comment to make you think a bit about reading the chart naked.

 

[Pat494]

Dont get too exited guys but there was an engulfing bull at 12.00 GMT

 

[Pat494]

robster970 -

As my son would say, EoD had uber volume... It was ungawdly, eh? Being a bit too cautious. Trying to get the feel for the naked chart

Appreciate the comments on the 1/2 pt stop. That's one of my failings, I have the tendency to move my stops as the trade goes south. So, I am attempting to find a stop value that is a bit tight but doesn't kick me out of to many trades. I noticed that when a run takes off, it doesn't back up very often or very much. That stop was also behind the previous price extremes which seemed to be a viable stop value. If you think increasing would be appropriate, I'll take a look at it.

My review of the gap data left me a bit confused. I think I need to reread some of the previous comments. I must be leaving out some of the details. aversano seems to have a good method but I was a bit uneven, as your T&S skills, on looking for a consistent application of the gap method. Something to do this weekend while the market is turned off.

Thx!

If you actually traded whats marked on the chart I think you are doing well.
If it was hindsight then the ideas are there where to trade.
Personally I am trying to understand this gap method. Usually I use moving averages, candles etc which seem more reliable. Stops can be put in by using Bollinger bands, but I usually use 2 pts stop and 2 points limit if I have to go and do something else otherwise a trailing stop of 1 point.

 

[robster970]

It's actually not that tricky Pat, apart from the ususal rule of thumb that everybody interprets the gap differently and trades it differently too.

 

[Pat494]

It's actually not that tricky Pat, apart from the ususal rule of thumb that everybody interprets the gap differently and trades it differently too.

yup still interested.

Would you believe it - got taken out at 1169.6, which was right on my lowest stop value !! (Could make a guy paranoid )
and then it was up all the way

 

[robster970]

yup still interested.

Would you believe it - got taken out at 1169.6, which was right on my lowest stop value !! (Could make a guy paranoid )
and then it was up all the way

I hate it when you dips 0.25pts past your stop and then turns.....happens to me more than I think it should.

 

[aversano]

Short @1165.00. First Target

 

[Pat494]

Apparently 1gigabyte per second broadband is being offered by Google for a test run.
Makes my ole dial-up a bit pedestrian

 

[aversano]

Aversano
I don't understand why you went short yesterday. Please explain.
Wednesday close was 1174.2
Thursday open was 1172.7
To fill the gap surely you should have been long ?

I apologize for responding later than sooner but I have 3/24/2010 close at 1164.75 and 3/25/2010 open as 1172.00

 

[Pat494]

I apologize for responding later than sooner but I have 3/24/2010 close at 1164.75 and 3/25/2010 open as 1172.00

oops my mistake - sorry got a day before

but I notice yahoo's figures are a bit different ?
3/24/2010 close = 1167.7
3/25/2010 open = 1170

 

[aversano]

I hate it when you dips 0.25pts past your stop and then turns.....happens to me more than I think it should.

Robster, was this one of your all or nothing gap trades?

 

[robster970]

Robster, was this one of your all or nothing gap trades?

No dude. I usually see this on trend pullbacks and reversal plays when I misjudge the entry. With a 4.5pt stop on gap, by the time it has got there, there is little chance of a return. I have been quite badly whipped this month on gap closures because of the bullish nature of the market.

 

[Pat494]

No dude. I usually see this on trend pullbacks and reversal plays when I misjudge the entry. With a 4.5pt stop on gap, by the time it has got there, there is little chance of a return. I have been quite badly whipped this month on gap closures because of the bullish nature of the market.

May I suggest you only trade gaps when the market is in a congestion area.
Easy to know because a 20 ma is flattish as the market oscillates. A slope indicator is very useful for this

 

[robster970]

May I suggest you only trade gaps when the market is in a congestion area.
Easy to know because a 20 ma is flattish as the market oscillates. A slope indicator is very useful for this

I had also arrived at this conclusion but using the 20MA is v.useful. Thanks Pat.

 

[aversano]

Went short @1168, got my targets.
Volume was very low today maybe due to it being a holiday week. Passover and Easter.

 

[robster970]

Took 1.5pts too.