Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

MarketExceptions

Trading the Opening Gaps

Did you find this poll useful?  

12 members have voted

  1. 1. Did you find this poll useful?

    • Absolutely
      5
    • yes
      1
    • Somewhat
      1
    • Not at all
      5


Recommended Posts

I have been trading the opening gaps for quite a while. My opening gap trades are based on some research I do trying to understand the behavior of gaps in various market conditions.

It has been profitable for me and some of the other people I helped.

In this thread I will share my information with you. I will also suggest the days and the conditions that I think are profitable to trade the gap.

But first lets start with basics:

Frequently the market opens in the morning at a different price than the price it closed at, the day before. This is called an opening gap. If the market opens higher, it is called an up gap and if it opens lower, it is called a down gap. Statistics shows there is a tendency that the price moves towards the close of yesterday. Many times the price reaches the close of yesterday, in which case we say the gap was filled. In fact, about 70% of all gaps get filled the same day. This should not be a surprise because the close of yesterday is the most important price we have. It is a price that buyers and sellers finally agreed on after a whole day of fighting with each others. This is a price that makes the most psychological impact on traders minds.

Experienced traders usually pick a narrow area of market to become master at. This area of opening gap can be the that small area of the market you may want to consider to be your area. There are many advantages in trading the opening gap. The one advantage is that most of the time your trade is done by 11:00 AM, many times much earlier, and you can have the rest of the day for yourself.

Generally speaking, there is a tendency that market closes the gap at some point. This is called fading a gap. However, this general tendency is not strong enough to justify the risk and reward for any size gap at any day under any market conditions or recent market patterns.

Successful gap traders pick certain gaps under certain conditions that gives them the edge. Just like any other strategy, you want to pick the cream of the crop to trade.

I have studied the opening gaps for quite a while. Using my background in probability and statistics, I have worked on many aspects of opening gaps, starting with the most common aspect that is fading a gap.

Share this post


Link to post
Share on other sites

10-19-10 ES Gap Fill - The ES did not fill the overnight half gap today. It came close, but did not fill. There is a gap, however, that the ES did fill. And that is the half gap from midnight on. I use two different Half Gaps". One is the traditional half gap from yesterdays close to today's open. The other one is from today's price at midnight to today's open. They are often two different price levels, and tell a story. Today's gap was from 1181.25 down to 1167.25. So there was an unusually big drop overnight. To big a gap, I guess, to fill the overnight half gap. But again, the midnight to open half gap filled. And it filled by 10:15

Share this post


Link to post
Share on other sites
why midnight? what is so important about that particular time.... most traders are sleeping.

 

Isn't that the whole point of gaps? Gaps occur when markets are 'sleeping'.

 

I presume as he speaks of 'half gaps' he is dividing the gap by time (hence midnight).

 

Incidentally markets really are 24 hours now maybe most US traders are sleeping though I know a few who get up for the EU open. :) That is one of the issues facing gap traders. I wonder if you have looked at other instruments TW? I am thinking ones that still trade in sessions and that are reasonably un correlated with instruments that trade 24 hours.

Share this post


Link to post
Share on other sites

If you take the price at midnight, then the price at 9:30, add them together and divide by 2, that is half the distance between the two price levels. I can only guess at why the half gap based on midnight and 9:30 sometimes works. Traders probably have had time between the close of yesterday, and midnight to think about what is probable and what their strategy is going to be. Maybe there is new information. In any case, the sentiment of investors can change from yesterday at the close to very early morning. And that sentiment, speculation, hedging, whatever their strategy is, is reflected in the price action.

Share this post


Link to post
Share on other sites
If you take the price at midnight, then the price at 9:30, add them together and divide by 2, that is half the distance between the two price levels. I can only guess at why the half gap based on midnight and 9:30 sometimes works. Traders probably have had time between the close of yesterday, and midnight to think about what is probable and what their strategy is going to be. Maybe there is new information. In any case, the sentiment of investors can change from yesterday at the close to very early morning. And that sentiment, speculation, hedging, whatever their strategy is, is reflected in the price action.

 

you said the keyword...

if you find 2 numbers,

anywhere,

any numbers,

then divide them by whatever number (it doesn't have to be 2),

you will find them sometimes works.

Share this post


Link to post
Share on other sites
you said the keyword...

if you find 2 numbers,

anywhere,

any numbers,

then divide them by whatever number (it doesn't have to be 2),

you will find them sometimes works.

 

I don't know what percentage of the time it works. I don't have extensive data with statistically proven numbers within a certain deviation error as backup proof. Do I need that before I make a post? I'm new here, so I just want to make sure. My apologizes to everyone in the group if I have provided misleading and useless information that does more harm than good.

It's really cool what you did with the big red letters. Can you teach me how to do that? Maybe I can figure it out on my own.

Share this post


Link to post
Share on other sites
I tried sending Tams an email, but Tams doesn't accept personal messages, so I'll post this here. The two numbers that I use are not just any two numbers. They are specific numbers under specific conditions. Tams post seems to insinuate that I just picked two numbers at random and divided them by some other random number. What is your point Tams? I don't know of anything in trading, where something is true all the time. So, I did not quantify exactly what I meant by "sometimes", and Tams did not quantify or provide anything to refute the half gap strategy. At the very least, Tams has twisted my words. If it was unintentional, then it shows a lack of paying attention to detail, and making a comment before you know what you are talking about. Hopefully that was the case.

 

if you think I insinuate something, you are full of self-serving imaginations.

if you are upset because of it, that's your own fricken problem.

no skin off my back.

 

Hey, you are twisting my words.

Why don't you pay attention to what I highlighted?

 

this is an anonymous open discussion board,

people talked about all kinds of things... including those that are none of your business.

 

I turned off the email to prevent idios like you sending me stupid self-righteous messages.

(if I could block that crybaby mods, I would too)

Edited by Tams

Share this post


Link to post
Share on other sites

In my experience, ES tends to reverse on the first major s/r level that it hit's in the morning, weather this be closing a Gap or a level as simple as the globex high or low. If you look at a 30min chart for this week, you'll see what I mean.

 

A market where trading the gap is very clear and highly effective is the bund. If gaps are something that you like trading, you might want to have a look at it as well as the markets you currently trade.

Share this post


Link to post
Share on other sites

You did an excellent job building a foundation for what the opening gap is. I was hoping you might actually share some of the rules you've developed over the years. I've attended several Master the Gap webinars on the topic. They've always been very informative. The main rule I took aware from their presentation is that the best gap plays are ones that fit in between the previous day's close and the previous day high or low depending on the close.

 

Gap Up: In between Close and Previous Day's High

Gap Down: In between the Close and the Previous Day's Low

 

Does anybody else have any other rules they would like to share regarding the Opening Gap?

Share this post


Link to post
Share on other sites
The main rule . . . is that the best gap plays are ones that fit in between the previous day's close and the previous day high or low depending on the close.

 

Gap Up: In between Close and Previous Day's High

Gap Down: In between the Close and the Previous Day's Low

 

 

Interesting, I hadn't heard of that before. I've heard people say that they don't try to fade the gap if, for example, the ES has gapped more than 10 points. There are days when the gap doesn't fill. My opinion is, that you can make a judgment about that according to how unexpected the news was. If there was an extremely positive news surprise for example, and UVOL is just screaming up, then I wouldn't try to fad the gap up.

Share this post


Link to post
Share on other sites

It's very easy to do statistical analysis on gaps. Either use your favourite charting package or if it's scripting language is beyond you, use excel. Rather than rely on some 5th hand rules based on some nebulous 'research' done when the pit session was the only game in town, see for yourself what is 'best', that is my number one rule :)

 

Opening gaps, opening range break outs, globex highs lows....even 'floor' pivots are all simple to test and can form the basis of a robust strategy. There really is no excuse for not doing the work yourself or if you really do want to rely on someone else (why?), pick someone that at least appears to have done it (or verified it) themselves. Someone that present rigorous test results with a robust (and obviously well documented) test procedure.

Share this post


Link to post
Share on other sites

Agree the bund is very good at filling its gaps, generally within 2 hours. But looks like the bobl is even better. Have you traded it ?

 

 

 

In my experience, ES tends to reverse on the first major s/r level that it hit's in the morning, weather this be closing a Gap or a level as simple as the globex high or low. If you look at a 30min chart for this week, you'll see what I mean.

 

A market where trading the gap is very clear and highly effective is the bund. If gaps are something that you like trading, you might want to have a look at it as well as the markets you currently trade.

Share this post


Link to post
Share on other sites
You hate them? Well,we've all got our pet hates on here haven't we?

 

You dug this old thread out just to tell us this.Still,lets run with it.So tell us how you arrived at this controversial and thought provoking announcement wiz.

How extensive and thorough was the research?.... i'm taking a wild guess partly based on your choice of words..such as "seems",but I could be very wrong.Btw,your post count is coming along nicely.When are planning to start marketing?

 

As you have an opinion on just about anything- I got a neighbour (farmer) who's doing a bit of a diy fix on one of his tractors which is running lean..He thinks it may be the velociraptor valve playing up,whereas I think it's the multi pin on the stegosaurus tail injector....any suggestions?

 

first of all, I didn't dig the thread, and even if I did, I don't see what the problem is...

second, I find your tone being unpolite, not to say more

and third, it s probable the velociraptor valve

Share this post


Link to post
Share on other sites

Totally agree with you that, as a Master, Mits could have been a bit more welcoming to you but who knows, everybody have their ways of saying welcome :).

Nonetheless I agree with him: which argument are you bringing to the discussion at hand? Any trading strategy you think of can be deemed worthless by anybody who doesn't master it. Mr Google can testify that there are lots of successful gap traders and teachers.

Attached is a chart of the Bund with 8 recent gaps. They didn't all fill, but that should be okay for the probability player, as the overwhelming majority (5/8) got filled with awesome profits. And there are some lessons to be learned from those not filled as well, if you scrutinize them closely.

 

first of all, I didn't dig the thread, and even if I did, I don't see what the problem is...

second, I find your tone being unpolite, not to say more

and third, it s probable the velociraptor valve

5aa711f46ad07_Bundgaps(SEP-13).png.b1f1f7336b18e9ed20f40c6c2c2abc44.png

Share this post


Link to post
Share on other sites
Totally agree with you that, as a Master, Mits could have been a bit more welcoming to you but who knows, everybody have their ways of saying welcome :).

Nonetheless I agree with him: which argument are you bringing to the discussion at hand? Any trading strategy you think of can be deemed worthless by anybody who doesn't master it. Mr Google can testify that there are lots of successful gap traders and teachers.

Attached is a chart of the Bund with 8 recent gaps. They didn't all fill, but that should be okay for the probability player, as the overwhelming majority (5/8) got filled with awesome profits. And there are some lessons to be learned from those not filled as well, if you scrutinize them closely.

 

well, the reason I said what I said it's about the simple fact that gaps are a controversy for the whole trading world as a matter of fact

 

western world consider them mandatory to close, while Japanese consider them continuation patterns (rising and falling windows).....so where's the catch? where's the trick?....oh wait.......the ones that do not close under the Western world approach, should be considered continuation patterns.....and the ones that do close should be considered regular gaps...like in London's subway.."mind the gap"....so in the end, it's about how you perceive them and how are you trading them.....same examples of successful traders looking for gaps to be closed exists of traders treating them as continuation patterns

 

I trade mainly currencies...this being a fact, I find sometimes that regardless of what stock are you in, because of fundamentals (daily ones), the indices are going down and your stock as well, so gaps are mostly common on equities...that's why, not relevant.....in conclusion, if you want to trade/study/interpret gaps, look at currency markets.......

 

hey, Mits, is this answer good enough for you? even if not, as Bobcollet puts it, you are 10 times better at Gann's approach...so no hard feelings taking, I would really appreciate your point of view on the Knowledge is of more value as gold thread......or email me if you don't want to post there, whatever....thanks and excuse my French....:)

Share this post


Link to post
Share on other sites

Trading gaps is about understanding what the gap signifies.....if the gap is an expression of momentum....the real question is....."is there enough interest and latent momentum in the market to sustain continuation of that move.....or is that interest and momentum exhausted (as is often the case) on the next open (whether it be the next open of a bar or candle, or the next open of a market session)

 

As with most things in financial markets, the "tell" is volume and the acceleration of either buying or selling volume on the next "open" after the gap....

 

For those who have a way to read volume, you simply watch which way it goes and compare to the movement of price in that same time frame.....IF volume is ramping up AND price is accelerating toward the gap fill, chances are quite good that the gap will fill...if (as is mostly the case) that momentum is exhausted on the open, you will may see one of two scenarios

 

Scenario 1....volume ramps directionally but price does not respond....this indicates that the other side has more horsepower and the move is likely to fail..

 

Scenario 2....volume and price create a reversal pattern and after a short hesitation, volume ramps up and then price follows in the opposite direction creating a reversal...

 

The bottom line is this....for those who don't or can't read volume, look for the acceleration of price either toward the gap fill or away....typically price will hesitate, creating a sideways move, and at that point you usually have an opportunity to enter...

 

Good luck

Share this post


Link to post
Share on other sites

The longer the time, the riskier the outcome imho. Not sure the extra risk is worth the while. I always consider gaps as intraday plays.

 

 

One of those unclosed gaps does close later but not on same day.So maybe higher odds for longer term trades v day trades?
Edited by kuokam

Share this post


Link to post
Share on other sites

Absolutely, MMs.

We are having the hottest days of 2013 right now in Europe. If that is the case in the Usa as well, can that be the reason ?

 

 

Easy guys ... let's all try to have constructive discussions without the negativity and name-calling

 

thx

MMS

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date: 11th July 2025.   Demand For Gold Rises As Trump Announces Tariffs!   Gold prices rose significantly throughout the week as investors took advantage of the 2.50% lower entry level. Investors also return to the safe-haven asset as the US trade policy continues to escalate. As a result, investors are taking a more dovish tone. The ‘risk-off’ appetite is also something which can be seen within the stock market. The NASDAQ on Thursday took a 0.90% dive within only 30 minutes.   Trade Tensions Escalate President Trump has been teasing with new tariffs throughout the week. However, the tariffs were confirmed on Thursday. A 35% tariff on Canadian imports starting August 1st, along with 50% tariffs on copper and goods from Brazil. Some experts are advising that Brazil has been specifically targeted due to its association with the BRICS.   However, the President has not directly associated the tariffs with BRICS yet. According to President Trump, Brazil is targeting US technology companies and carrying out a ‘witch hunt’against former Brazilian President Jair Bolsonaro, a close ally who is currently facing prosecution for allegedly attempting to overturn the 2022 Brazilian election.   Although Brazil is one of the largest and fastest-growing economies in the Americas, it is not the main concern for investors. Investors are more concerned about Tariffs on Canada. The White House said it will impose a 35% tariff on Canadian imports, effective August 1st, raised from the earlier 25% rate. This covers most goods, with exceptions under USMCA and exemptions for Canadian companies producing within the US.   It is also vital for investors to note that Canada is among the US;’s top 3 trading partners. The increase was justified by Trump citing issues like the trade deficit, Canada’s handling of fentanyl trafficking, and perceived unfair trade practices.   The President is also threatening new measures against the EU. These moves caused US and European stock futures to fall nearly 1%, while the Dollar rose and commodity prices saw small gains. However, the main benefactor was Silver and Gold, which are the two best-performing metals of the day.   How Will The Fed Impact Gold? The FOMC indicated that the number of members warming up to the idea of interest rate cuts is increasing. If the Fed takes a dovish tone, the price of Gold may further rise. In the meantime, the President pushing for a 3% rate cut sparked talk of a more dovish Fed nominee next year and raised worries about future inflation.   Meanwhile, jobless claims dropped for the fourth straight week, coming in better than expected and supporting the view that the labour market remains strong after last week’s solid payroll report. Markets still expect two rate cuts this year, but rate futures show most investors see no change at the next Fed meeting. Gold is expected to finish the week mostly flat.       Gold 15-Minute Chart     If the price of Gold increases above $3,337.50, buy signals are likely to materialise again. However, the price is currently retracing, meaning traders are likely to wait for regained momentum before entering further buy trades. According to HSBC, they expect an average price of $3,215 in 2025 (up from $3,015) and $3,125 in 2026, with projections showing a volatile range between $3,100 and $3,600   Key Takeaway Points: Gold Rises on Safe-Haven Demand. Gold gained as investors reacted to rising trade tensions and market volatility. Canada Tariffs Spark Concern. A 35% tariff on Canadian imports drew attention due to Canada’s key trade role. Fed Dovish Shift Supports Gold. Growing expectations of rate cuts and Trump’s push for a 3% cut boosted the gold outlook. Gold Eyes Breakout Above $3,337.5. Price is consolidating; a move above $3,337.50 could trigger new buy signals. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Back in the early 2000s, Netflix mailed DVDs to subscribers.   It wasn’t sexy—but it was smart. No late fees. No driving to Blockbuster.   People subscribed because they were lazy. Investors bought the stock because they realized everyone else is lazy too.   Those who saw the future in that red envelope? They could’ve caught a 10,000%+ move.   Another story…   Back in the mid-2000s, Amazon launched Prime.   It wasn’t flashy—but it was fast.   Free two-day shipping. No minimums. No hassle.   People subscribed because they were impatient. Investors bought the stock because they realized everyone hates waiting.   Those who saw the future in that speedy little yellow button? They could’ve caught another 10,000%+ move.   Finally…   Back in 2011, Bitcoin was trading under $10.   It wasn’t regulated—but it worked.   No bank. No middleman. Just wallet to wallet.   People used it to send money. Investors bought it because they saw the potential.   Those who saw something glimmering in that strange orange coin? They could’ve caught a 100,000%+ move.   The people who made those calls weren’t fortune tellers. They just noticed something simple before others did.   A better way. A quiet shift. A small edge. An asymmetric bet.   The red envelope fixed late fees. The yellow button fixed waiting. The orange coin gave billions a choice.   Of course, these types of gains are rare. And they happen only once in a blue moon. That’s exactly why it’s important to notice when the conditions start to look familiar.   Not after the move. Not once it's on CNBC. But in the quiet build-up— before the surface breaks.   Enter the Blue Button Please read more here: https://altucherconfidential.com/posts/netflix-amazon-bitcoin-blue  Profits from free accurate cryptos signals: https://www.predictmag.com/ 
    • What These Attacks Look Like There are several ways you could get hacked. And the threats compound by the day.   Here’s a quick rundown:   Phishing: Fake emails from your “bank.” Click the link, give your password—game over.   Ransomware: Malware that locks your files and demands crypto. Pay up, or it’s gone.   DDoS: Overwhelm a website with traffic until it crashes. Like 10,000 bots blocking the door. Often used by nations.   Man-in-the-Middle: Hackers intercept your messages on public WiFi and read or change them.   Social Engineering: Hackers pose as IT or drop infected USB drives labeled “Payroll.”   You don’t need to be “important” to be a target.   You just need to be online.   What You Can Do (Without Buying a Bunker) You don’t have to be tech-savvy.   You just need to stop being low-hanging fruit.   Here’s how:   Use a YubiKey (physical passkey device) or Authenticator app – Ditch text message 2FA. SIM swaps are real. Hackers often have people on the inside at telecom companies.   Use a password manager (with Yubikey) – One unique password per account. Stop using your dog’s name.   Update your devices – Those annoying updates patch real security holes. Use them.   Back up your files – If ransomware hits, you don’t want your important documents held hostage.   Avoid public WiFi for sensitive stuff – Or use a VPN.   Think before you click – Emails that feel “urgent” are often fake. Go to the websites manually for confirmation.   Consider Starlink in case the internet goes down – I think it’s time for me to make the leap. Don’t Panic. Prepare. (Then Invest.)   I spent an hour in that basement bar reading about cyberattacks—and watching real-world systems fall apart like dominos.   The internet going down used to be an inconvenience. Now, it’s a warning.   Cyberwar isn’t coming. It’s here.   And the next time your internet goes out, it might not just be your router.   Don’t panic. Prepare.   And maybe keep a backup plan in your back pocket. Like a local basement bar with good bourbon—and working WiFi.   As usual, we’re on the lookout for more opportunities in cybersecurity. Stay tuned.   Author: Chris Campbell (AltucherConfidential) Profits from free accurate cryptos signals: https://www.predictmag.com/   
    • DUMBSHELL:  re the automation of corruption ---  200,000 "Science Papers" in academic journal database PubMed may have been AI-generated with errors, hallucinations and false sourcing 
    • Does any crypto exchanges get banned in your country? How's about other as Bybit, Kraken, MEXC, OKX?
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.