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Attachments: Gap Trading
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Gap Trading

  • #241
  • Jan 10, 2011 7:49am Jan 10, 2011 7:49am
Quoting honkin
cheers roundrock. A shame. I often find no gaps in my daily charts, but they are certainly there in 1 minute or 5 minute charts.

9am Australian time today as follows:

GBP/AUD Close 1.5614 Open 1.5637 Gap not quite closed yet, currently 1.5631
EUR/USD Close 1.2907 Open 1.2878 My Trade Result +24
USD/JPY Close 83.15...
Hi, what exit strategy do you use?

cheers
  • #242
  • Jan 10, 2011 11:18am Jan 10, 2011 11:18am
Quoting honkin
cheers roundrock. A shame. I often find no gaps in my daily charts, but they are certainly there in 1 minute or 5 minute charts.

9am Australian time today as follows:

GBP/AUD Close 1.5614 Open 1.5637 Gap not quite closed yet, currently 1.5631
EUR/USD Close 1.2907 Open 1.2878 My Trade Result +24
USD/JPY Close 83.15 Open 83.24 Didn't take it as under 20 pip gap. Trade went on to fill the gap and continue to 83.06 in 42 minutes.
AUD/USD Close 0.9958 Open 0.9928 Trade Result +26
AUD/CAD Close 0.9919 Open 0.9861 Gap not filled, but I exited at .9896...
can you try other brokers like FXCM or any other broker who shows gaps on daily chart ?

anyway here is the changed EA that would work off any TF. you can drop it on any TF and if it finds gap it trades. i didnt test this, but should work. you can also chose not to apply sma rule
Attached File(s)
File Type: mq4 Weekend Gap.mq4   11 KB | 616 downloads
  • #243
  • Jan 11, 2011 8:48am Jan 11, 2011 8:48am
Quoting Kowalczyk
The first way is more risky. If at 5:45 PM Sunday you see that EURUSD is down more than ~40 pips from fridays close, then you would sell gold right before the Gold market opens (because if EURUSD is down a lot, their is a high probability gold will shoot down.) And you would buy gold if EURUSD is up more than ~40 pips. The reason is that EURUSD show the current value, but since the gold market did not open yet, you would be trading last fridays gold prices....
Hi Kowalczky,

Interesting strategy. So is 40 pips the "magic number"? I notice on Sunday EURUSD had gapped down ~33 pips, but XAUUSD moved up on open according to my MT4 broker chart. Did you trade this?
  • #244
  • Jan 12, 2011 7:18am Jan 12, 2011 7:18am
Quoting roundrock
can you try other brokers like FXCM or any other broker who shows gaps on daily chart ?

anyway here is the changed EA that would work off any TF. you can drop it on any TF and if it finds gap it trades. i didnt test this, but should work. you can also chose not to apply sma rule
Howdy roundrock

Thanks so much for tweaking this EA. I'll give it a try/ I dropped FXCM ages ago when they couldn't handle my news trades. Their spreads became quite ludicrous during news.

cheers
  • #245
  • Jan 12, 2011 10:50am Jan 12, 2011 10:50am
The best "Gap" strategies are really just natural tendencies. For example, the EURUSD opens lower at the Sydney Open than it did on Friday's close roughly 65% of the time. However, when the market does open lower during the Sydney Open, it continues to drop for about 4 hours 70+% of the time. However, the Sydney open has little effect on most other currencies. One strategy usually only works with one currency, not every market and every interval. Be sure to backtest these theories so you can have a better view of the market as a whole rather than being led blindly.

Happy Trading :-)
  • #246
  • Jan 12, 2011 4:45pm Jan 12, 2011 4:45pm
Quoting shandy
Hi Kowalczky,

Interesting strategy. So is 40 pips the "magic number"? I notice on Sunday EURUSD had gapped down ~33 pips, but XAUUSD moved up on open according to my MT4 broker chart. Did you trade this?
Although EURUSD did go down as much as ~33 pips, at 5:45, it was only down about 10 pips, so I would not have traded. Also, their was no spike when it opened so I wouldn't trade the retracement either. It has to be down or up atleast 40-50 pips at 5:45 (the more the better). The basic principle behind this strategy is that is EURUSD is down more than 40 pips, the USD got stronger, therefore gold (vs. the dollar, XAUUSD) should make a large move down also.
  • #247
  • Edited 8:00pm Jan 12, 2011 5:00pm | Edited 8:00pm
Quoting whatfx
i see. the question of stop is extremely important. you say if you are trading the retracement up, then the stop should be just below the low. but the low will be about the same point you entered trade ! also not sure what you mean by 3 stops being hit ? that would be a disaster and will take months of weekend gap trading to recover.

i have seen one weekend where the price never retraced but kept on going one way, that one trade itself would have thrown you back a few months. so i think this needs to be given a thought.
I will try to reexplain myself using the chart I posted. The 4th candlestick was a doji followed by a large bullish candlestick. That is a reversal signal. You would close your short position and enter long. Your stop for the long position would below the 5th candlestick (because it reached the lowest point before the reversal).

Now lets say gold went even lower, your stop would be hit. Then you would wait for another reversal signal (do not enter a short position). Once you see a reversal signal, you would enter long with your stop below the new low.

If your stop got hit again you would repeat.

If your stop gets hit 3 times (I have never seen this happen), you would just stop trading and cut your losses. The thing is, if your stop got hit 3 times, you would lose $10-$15 dollars on gold, but if your trade is sucessful, you would make atleast $20+ on gold so even if your stops get hit 3 times, your not really in trouble.

The great thing about this strategy is that if you stop gets hit once or even twice, you would make even more money because the retracement would be a lot larger, so don't get mad.

Also, could you please provide a date or chart of a time when gold never retraced.
  • #248
  • Jan 14, 2011 6:58am Jan 14, 2011 6:58am
Quoting Kowalczyk
I will try to reexplain myself using the chart I posted. The 4th candlestick was a doji followed by a large bullish candlestick. That is a reversal signal. You would close your short position and enter long. Your stop for the long position would below the 5th candlestick (because it reached the lowest point before the reversal).

Now lets say gold went even lower, your stop would be hit. Then you would wait for another reversal signal (do not enter a short position). Once you see a reversal signal, you would enter long with your stop below the...


i dont know how to load charts here. but i can provide you with the date gold never retraced.

also, there are hardly any weekend gaps on gold . maybe once in a month. and even then the gap usually is not significant enough. how many gaps do u get a month and which broker are you using ? what time of day do you get these gaps in GMT ?

i do not think your trading criteria would work on weekday gaps though. or gaps on any other fx pairs.
  • #249
  • Jan 14, 2011 9:43am Jan 14, 2011 9:43am
Quoting whatfx
i dont know how to load charts here. but i can provide you with the date gold never retraced.

also, there are hardly any weekend gaps on gold . maybe once in a month. and even then the gap usually is not significant enough. how many gaps do u get a month and which broker are you using ? what time of day do you get these gaps in GMT ?

i do not think your trading criteria would work on weekday gaps though. or gaps on any other fx pairs.
The number of trades really depend on the month. Sometimes it is two or three and sometimes it is zero. I rarely trade on weekdays. And as for the gap, it is usually more than sufficient to make a nice profit.

Please provide a day when gold never retraced.
  • #250
  • Jan 16, 2011 8:51am Jan 16, 2011 8:51am
Quoting Kowalczyk
The number of trades really depend on the month. Sometimes it is two or three and sometimes it is zero. I rarely trade on weekdays. And as for the gap, it is usually more than sufficient to make a nice profit.

Please provide a day when gold never retraced.




sure. gold never retraced on the weekend of 20/12/2010. opened up with a gap. never retraced back down to fill the gap. so you would have been stopped out here on whatever stop level you entered.

also, i did a quick backtest on alpari. hardly any gaps come about and those that do are not worth trading:



27/9 - no gap - no trade

4/10 - only 1 pip gap - no trade

11/10 - 4 pip gap. not worth trading - after spread - no trade

18/10 - 2 pips gap - no trade

27/10 - no gap - no trade

1/11 - 5 pips gap. possible trade but just 1/2 pips to be made !

8/11 - 2 pip gap - no trade

15/11 - 1 pip gap - no trade

22/11 - 3 pip gap - no trade

29/11 - no gap - no trade

6/12 - no gap - no trade

13/12 - 3 pip gap. no trade.

27/12 - 4 pip gap - no trade

31/12 - no gap - no trade

10/1 - no gap



so my friend, i cant see any single gap trading oppurtunity in the last 2.5 months . i would like to see where you get your figures from, and what results you have had.



also, you say on the opening of the gap, you wait for the market to move in the same direction, then after a reversal occurs then enter trade. but what if reversal occurs on the opening of the gap itself ?



for example, say gold opened with a gap 'UP' by 8 pips. so we would need to enter short so that when gold retraces back down our gap would be filled and we would win the trade. but you say to wait for gold to go up more before entering a short. and once its gone up and then reverses back down, then to enter short.
my question to you is, when gold opens on the gap, what if it immediately goes back down ? does not go up. when would we enter short ? we wont have a chance to because we will be waiting for the market to go up before entering short, which it never did. and we would have missed our short. what do you do then ? this occurs a lot. prime example on the 1/11/2010.


also, what about stops ?? sometimes market goes up/down by even 15 or more pips before filling the gap !
a huge amount of pips to lose just to make 6-7 pips when the gap fills, and there is no guarantee the gap will fill.


so, i would like to see your results and what you do. because i cant see how this would work...


regards
  • #251
  • Jan 16, 2011 9:12am Jan 16, 2011 9:12am
also, on the above example, if we wait for gold to go up more before entering short, at what point do we decide it has gone up as much as possible ? and when to enter short ? kind of hard to predict. if you enter short say 2-3 candles after, it may still go up after that.
  • #252
  • Jan 16, 2011 11:23am Jan 16, 2011 11:23am
Hi guys,

I'm just wondering, why not just create a gap ea with the exact open price of the gap on sunday and the TP should be close of the gap or in other words close of last friday's candle. I do trade manually every monday and its a success for major pairs, dare not trade with exotic pairs due to uncertainty, of course with some losses but overall its profitable.

also i would like to know if gap trader ea could be enhanced to have the setting above instead letting the percentage decide the SL and TP.

I've tried gap trader baktest and its showing positive results however the data isn't true let me know if you face the same.

cheers!!!!!!......
  • #253
  • Jan 16, 2011 2:26pm Jan 16, 2011 2:26pm
Quoting bsm888
Hi guys,

I'm just wondering, why not just create a gap ea with the exact open price of the gap on sunday and the TP should be close of the gap or in other words close of last friday's candle. I do trade manually every monday and its a success for major pairs, dare not trade with exotic pairs due to uncertainty, of course with some losses but overall its profitable.

also i would like to know if gap trader ea could be enhanced to have the setting above instead letting the percentage decide the SL and TP.

I've tried gap trader baktest and...


try the gap ea attached by roundrock above.


what strategy do you follow to trade the gap ?
  • #254
  • Jan 17, 2011 1:15am Jan 17, 2011 1:15am
hi... weekend gap does not show and backtest results. of i'm doing plotting it wrongly....

my strategy very simple... i wake up at the start of the day on sunday night or monday morning at my timezone and will monitor those mt4 screens with high gaps using TF Daily . if yes i open trade... normally i would max out with the TP right up to the close of last week candle...as history tells that gap always closes the windows exactly for major pairs and crosses. As for the exotic pairs... i have no idea to trade gap or even brave enough to trade them as it looks a bit scary due to their spreads and not having a good history for closing gaps.

cheers!!!!....
  • #255
  • Jan 20, 2011 7:58pm Jan 20, 2011 7:58pm
Quoting bsm888
hi... weekend gap does not show and backtest results. of i'm doing plotting it wrongly....

my strategy very simple... i wake up at the start of the day on sunday night or monday morning at my timezone and will monitor those mt4 screens with high gaps using TF Daily . if yes i open trade... normally i would max out with the TP right up to the close of last week candle...as history tells that gap always closes the windows exactly for major pairs and crosses. As for the exotic pairs... i have no idea to trade gap or even brave enough to trade them...
not always. sometimes the gaps dont close. sometimes there is a huge drawdown before gap closes. so how do you handle that ? for example eu this week opened with gap down, never closed the gap, missed it by about 5 pips.
  • #256
  • Jan 20, 2011 8:22pm Jan 20, 2011 8:22pm
depends on which broker you are looking at i guess.
gaps on ibfx are quite different than say gaps on gomarket or fxpro.
  • #257
  • Jan 21, 2011 3:41pm Jan 21, 2011 3:41pm
Quoting Kowalczyk
I will try to reexplain myself using the chart I posted. The 4th candlestick was a doji followed by a large bullish candlestick. That is a reversal signal. You would close your short position and enter long. Your stop for the long position would below the 5th candlestick (because it reached the lowest point before the reversal).

Now lets say gold went even lower, your stop would be hit. Then you would wait for another reversal signal (do not enter a short position). Once you see a reversal signal, you would enter long with your stop below the...

where are you kowalcyzk ?
  • #258
  • Jan 23, 2011 7:23pm Jan 23, 2011 7:23pm
Quoting Kowalczyk
The number of trades really depend on the month. Sometimes it is two or three and sometimes it is zero. I rarely trade on weekdays. And as for the gap, it is usually more than sufficient to make a nice profit.

Please provide a day when gold never retraced.

for example todays gap on gold was just 1 pip. how would you trade that ?
  • #259
  • Jan 23, 2011 7:45pm Jan 23, 2011 7:45pm
Quoting whatfx
for example todays gap on gold was just 1 pip. how would you trade that ?
Sorry, I was busy this week. I would not have, and will not traded this week. Their was no major movement in the USD before gold opened and their was no strong movement. If you look at the 15 min. chart, gold did make a ~$5 movement but the candle closed more than halfway down. The next candle was bullish but failed to make new highs. And the third candlestick was bearish and went lower than the previous candlestick. This shows that there is / was no strong movement. And even though gold is making new highs as I type this, its better to play it safe than sorry, so I will not be trading today. As we clarified before, these opportunities are few and far between, but when they do occur, they are almost a guaranteed profit.

As for the dates you provided earlies, I will try to look over them later this week.
  • #260
  • Jan 23, 2011 8:28pm Jan 23, 2011 8:28pm
Quoting Kowalczyk
Sorry, I was busy this week. I would not have, and will not traded this week. Their was no major movement in the USD before gold opened and their was no strong movement. If you look at the 15 min. chart, gold did make a ~$5 movement but the candle closed more than halfway down. The next candle was bullish but failed to make new highs. And the third candlestick was bearish and went lower than the previous candlestick. This shows that there is / was no strong movement. And even though gold is making new highs as I type this, its better to play it...

yes but eu opened with a gap of around 14 pips...so is that not enough movement for gold ? and would u have traded the eu gap as well ?
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