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Gap Trading

jack,

thanks a lot man, i had done the same math just wanted for you to confirm it..now everything is set we waiting for the gaps,i will do some backtesting of my own and get into it live hopefully sooner than later
jack,

does your broker let you change the price of a lot...mine is fixed...for lets say 1:100 leverage 1pip iz 10 dollars,and i can only enter trades with 1 or 2 or 3,round number of lots?any advice??
Quoting vukovi21
jack,

does your broker let you change the price of a lot...mine is fixed...for lets say 1:100 leverage 1pip iz 10 dollars,and i can only enter trades with 1 or 2 or 3,round number of lots?any advice??
Hi vukovi,
On USD pairs one pip will always equal $10 for a standard lot traded. Other pairs will vary. A mini-lot on a USD pair would be $1. Micro lots would be $0.10. Most brokers have micro accounts available but not all.

Leverage deals with how much margin is required to maintain a position. For example at 100:1 margin on a standard lot on the EURUSD is $1405 whereas 200:1 leverage margin would be $702. Here is a link to a great margin / pip value calculator. It is a free download. You have to submit your email if I remember correctly. It is on the Currensys trading system site. Look towards the bottom.

http://www.currensys.com/
In the Gap Trader EA - under input what are the following values

Variable Value Start Step Stop

Gap Range : 3


Can someone explain what is:- Start Step and Stop.

Thank You
Hi jack,

first of all i am gonna say thanks a lot jack,im sorry if boring you to death,but there is just one thing im not getting,so please if you have time help me,i'll give an example so its easier to explain..

lets say my account is 100 000 so if im gonna risk 5% its 5000,and for the simple math lets say the gap is 100pips,so my target is 75pips(aiming for that 75% of the gap)

Risk=$5000 (5% of $100 000)
Lot size=6.6 or $66.6

my question is this,i need to enter with 6.6 lots and shoot for those 75pips...but how am i gonna do it when i can only enter with round number of lots...ie 6,7 etc???
i hope my question had more sense now...

thanks again for your help,i dont wanna be ungrateful,because you helped me a lot
Quoting vukovi21
Hi jack,

first of all i am gonna say thanks a lot jack,im sorry if boring you to death,but there is just one thing im not getting,so please if you have time help me,i'll give an example so its easier to explain..

lets say my account is 100 000 so if im gonna risk 5% its 5000,and for the simple math lets say the gap is 100pips,so my target is 75pips(aiming for that 75% of the gap)

Risk=$5000 (5% of $100 000)
Lot size=6.6 or $66.6

my question is this,i need to enter with 6.6 lots and shoot for those 75pips...but how am i gonna do it when i can...
You need to get another broker. You need to be able to trade fractional lots.
Quoting vukovi21
Hi jack,

first of all i am gonna say thanks a lot jack,im sorry if boring you to death,but there is just one thing im not getting,so please if you have time help me,i'll give an example so its easier to explain..

lets say my account is 100 000 so if im gonna risk 5% its 5000,and for the simple math lets say the gap is 100pips,so my target is 75pips(aiming for that 75% of the gap)

Risk=$5000 (5% of $100 000)
Lot size=6.6 or $66.6

my question is this,i need to enter with 6.6 lots and shoot for those 75pips...but how am i gonna do it when i...
Hi vukovi,

First off, you definitely are not boring me to death! I actually enjoy doing this. Now, to answer your question, what broker are you using? Almost every broker I am aware of offers mini and standard lots to be traded in the same account. Some even offer standard, mini, and micro to be traded in the same account. Just be aware that not all brokers work well with the weekend gap strategy. Generally speaking the earlier a broker opens on Sunday's the better.

Now if for whatever reason you are with a broker that only allows you to trade in standard lot sizes, my recommendation would be to always round down on your lot sizes. In your example above of 6.6 lots, I would go with 6. The bottom line is never ever exceed your predetermined risk percentage per trade. And please don't feel you need to risk 5% per trade. It's like I said before, 5% is the high end of risk per trade. If you feel more comfortable go with something smaller like 2%. Most courses on trading recommend no more than 2% risk per trade. There is no holy grail. You will always have loosing trades. It's just the cost of doing business. The idea is to live to trade another day. Let me know if that helps.
Quoting Jack Wasp
If anyone's still following this forum here is the strategy I use to trade weekend gaps. It has been very successful to this point.

Strategy:
-On the Sunday open if a gap of 13 pips or more is present, buy if there is a gap down and sell if there is a gap up. Buy/Sell at market.

-I define a gap as the difference between the Sunday open and the top or bottom of the Friday's candle body depending on the market direction. Example: for a gap down I measure the distance between the Sunday open and the bottom of the Friday candle body.

-Set...

hi jack

thanks for your input.

just want to know if you have traded this live yet and what were your results ? trading demo is not the same thing as trading live. you could be up 90% on a demo but when trading live find you are in fact losing ! its a whole new ballgame trading live.

also your r:r of 1:1, is that not very risky ? i.e. a few losses will negate any profits to be made ? and if the stop is just 75% of the gap, and assuming the gap is around 20 pips which is what usually happens on most pairs i.e. the sunday gaps are pretty small, then it is highly likely the SL will be hit within a few minutes of markets opening ?

lastly, can you confirm which broker is GAIN ? Iam based here in the u.k. so iam not sure what time it would be here when the markets open on a sunday in the u.s. ? especially on the GAIN platform. also, what TF do we use to look at the gaps ?

regards

Quoting whatfx
hi jack

thanks for your input.

just want to know if you have traded this live yet and what were your results ? trading demo is not the same thing as trading live. you could be up 90% on a demo but when trading live find you are in fact losing ! its a whole new ballgame trading live.

also your r:r of 1:1, is that not very risky ? i.e. a few losses will negate any profits to be made ? and if the stop is just 75% of the gap, and assuming the gap is around 20 pips which is what usually happens on most pairs i.e. the sunday gaps are pretty small,...
Hi whatfx,

Yes I have traded this strategy live but just started last Sunday. It did win for me. On one of my accounts a setup triggered in the EURUSD which won.

Over the course of the last year in my other trading styles I kept noticing this Sunday gap happening. In the back of my mind that quite voice kept telling me to take a look into it. Perhaps that was from my days of futures trading. But regardless the voice wouldn't shut up. We had a blizzard up here where I live and I took full advantage of that by locking myself in my office for two days to study. I backtested my theory ran the numbers and was amazed. Does this mean that it will continue performing like this? Absolutely not. This strategy could fall flat on it's face from now on but for that matter any strategy could. All I know is that it has done spectacular over the last year and from my initial analysis it seems 2008 was similar. I will be running the backtests on that soon.

Yes going from demo to live is different. There are two types of differences. The first is obvious; slippage, spreads, etc. The second is not so obvious; emotions. The second is by far the deadliest. The first problem can be dealt with to some degree by finding the appropriate broker for this strategy. The second, well let's just say there are books for this. One thing I have learned is to paper trade until you are tired of being right and not making any money! That will build confidence in your trading plan which will quite your emotions. Emotions and trading don't mix.

I chose a risk to reward ratio of 1:1 because mainly it fits my trading personality. This is partially how I solved the emotions issue. It works for me. I use this ratio in some of my other live trading strategies as well. This risk reward ratio is better suited for something that wins at least 65% of the time. In my opinion, when you go for a risk reward ratio of 2:1 or even higher you can have a series of losses that might not be crippling to your account but they could be crippling to your emotions. Never underestimate your emotions in your trading. I have in the past and it cost me dearly.

As far as the small gap size, my personal strategy for this is I don't like to go after gaps smaller than 13 pips. 13 pips means I would be targeting a 10 pip move. I am testing more of a scalping strategy where one would go after that smaller move. That is still in the works.

GAIN is Forex.com. Lucky you being in the UK! You guys don't fall under the ridiculous regulations of the CFTC. A topic for another thread. I was with Forex.com (GAIN) until my account was repatriated to the US. Their Sunday opening is currently 1600 central time which is GMT-5. I am currently using FXOpen for this strategy which opens on Sunday at 1700 central. My best advice would be setup a couple of demo accounts at various brokerages to find which suites you best. This may seem ridiculous but I have at least 10 different demo accounts all from different brokerages. Yes, I have been broker shopping recently.

Sorry about the long post. Hopefully I answered your question. And like I said, stay tuned, I'll be working on more backtests for this strategy. I wanted to have them done for this weekend but I haven't had the time. Take care.
I forgot to answer your question about timeframes. I look at the 30MIN but it doesn't really matter. All you need is the Sunday opening price and the Friday closing or opening price depending upon the direction of the gap. These trades generally seem to last 30 minutes to a couple of hours. There are exceptions. One trade I looked at lasted a day or two if I remember right.
Ill be watching the next Gap just out of curiosity
Add value everyday in Pips
Quoting Jack Wasp
Hi whatfx,

Yes I have traded this strategy live but just started last Sunday. It did win for me. On one of my accounts a setup triggered in the EURUSD which won.

Over the course of the last year in my other trading styles I kept noticing this Sunday gap happening. In the back of my mind that quite voice kept telling me to take a look into it. Perhaps that was from my days of futures trading. But regardless the voice wouldn't shut up. We had a blizzard up here where I live and I took full advantage of that by locking myself in my office for...

thanks for your response.

i did a quick backtest on my broker platform ''ig index''. on the eur / usd pair. thier friday closing time is 9pm GMT, and sunday opening at 9pm GMT also.

ok. what i found is about 60% of the time, the price gaps over 15 pips. these are the only trades that can be taken into account. so taking these trades for 6 trades in the past i got 3 wins and 3 losses.

maybe if i went back a bit more the results could have been different.

also, maybe if i used a different broker the results could have been different also.

but as it stands at present it is break even for the 6 trades. so my thought at the moment is if this gap trading is worthwhile as after about 2-3 months if one hasn't made any pips then its kind of disheartening. after all we are in forex to make pips !


anyway keep us posted on your results/findings. and any new ideas about trading the gap or which is the best broker.

also i forgot to mention i had no joy with the other pairs you listed as on ig index those pairs rarely gap for more than 15 pips.


regards
Quoting whatfx
thanks for your response.

i did a quick backtest on my broker platform ''ig index''. on the eur / usd pair. thier friday closing time is 9pm GMT, and sunday opening at 9pm GMT also.

ok. what i found is about 60% of the time, the price gaps over 15 pips. these are the only trades that can be taken into account. so taking these trades for 6 trades in the past i got 3 wins and 3 losses.

maybe if i went back a bit more the results could have been different.

also, maybe if i used a different broker the results could have been different also....
I'm glad you looked at your own backtest data. I don't want anyone to just blindly trade this with real money without either demo testing or doing their own backtesting on their broker.

The success of this strategy definitely varies from broker to broker. I ran the backtest on a Forex.com account and actually live trade this on an FXOpen account. So far here is a brief list of brokers that this strategy seems to work on:

Forex.com
FXOpen
FXCM

I will update this list as I find more brokers that it fits. I am going to build an ongoing spreedsheet detailing the trades taken that I will post here. The criteria seems to be the following:

-Earlier Sunday open times. Something in the area of 2200 GMT is best.
-Spreads must be fairly normalized during that time period. For example, this disqualifies Oanda because they widen their spreads to 10 over the weekends.
-The broker must pass at least a brief backtest as compared to the original backtest I ran which I will post again below.

Keep in mind that the period of 9/12/10 thru 10/31/10 the system only took four trades, all winners on a Forex.com account.

Also the way I trade it, my minimum gap size is 13 pips which would then shoot for a TP and SL of 10 pips. Be sure to add your broker's spread.

Compare the data I've compiled in the attached spreesheet with your broker. Demo test this first! Do not risk real money if you are not comfortable with this! Find the risk percentage that is suitable for you. Just because the backtest used 5% does not mean you should. There is absolutely nothing wrong with going with 1-2% risk per trade. Be creative with this. If you find something that works better, by all means let us know. In a market that trades $3.2T plus per day I think there is plenty for all of us to go around.

I will be here this afternoon and post as best I can to keep everyone alerted to what I see. Once again here is the link to prices that should give you an idea of what is happening prior to your broker's open:

http://www.oanda.com/currency/real-time-rates

Please review the backtest and strategy in the attached spreedsheet and good luck to everyone this evening (or morning)!

Attached File(s)
File Type: xls GAP BACKTEST.xls   30 KB | 339 downloads
I am sure all of you are aware but just as a reminder, the US just went to Daylight Savings time. Keep this in mind for the Sunday open.
hi guys,

what are you thoughts,the opening is coming...as much as i can tell we wont have major gaps this week,hope im wrong...your insight???
I spotted one setup on my FXOpen account.

EURUSD
GAP=18
75%=13.5 (ROUND UP TO 14)
TP=14 PIPS (+SPREAD)
SL=14 PIPS (+SPREAD)
SPREAD=2 PIPS

Attached Image (click to enlarge)
Click to Enlarge Name: eurusd.gif Size: 12 KB
tnx jack already in it...this is the only pair with somewhat decent gap for me
Here is a setup on the NZDUSD on an FXOpen account that failed. I haven't backtested this pair yet so it was just a test. Spread is 5.

Attached Image (click to enlarge)
Click to Enlarge Name: nzdusd.gif Size: 11 KB
Quick 15 Pips on the EUR. 3 weeks and three winners!
FYI
FXOpen has had a 2 Pip spread for all these Monday AM trades!
Attached Image (click to enlarge)
Click to Enlarge Name: 08 nov euro.gif Size: 14 KB
Quoting Jack Wasp
I spotted one setup on my FXOpen account.

EURUSD
GAP=18
75%=13.5 (ROUND UP TO 14)
TP=14 PIPS (+SPREAD)
SL=14 PIPS (+SPREAD)
SPREAD=2 PIPS

Attachment

whats the outcome ?

on my fxcm feed it hit SL.
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