Gap Trading

My friend Blott, I am attaching a chart of the present behavior of the bund after a gap at the open this morning. Since a couple of months I am gravitating towards Market profile and Tape reading as my main tools.
As you can see, have you gone short right then you'd have had some trouble coming out profitable. But had you waited for it to revisit some previous zones, you could have gotten some clues as to which direction to take. I've come to the conclusion that as with all decision aids in trading, there is no sure fire rule, TIMING IN CONTEXT IS ALWAYS KING.
Actually, there is something that dictates its law even in the face of a gap and that is the previous level: open, close, value areas, Poc 's of past days/weeks. I have marked some for you to see . I am sure you can have similar situations on your own charts.
As for statistics, make sure you have at least 20 occurrences before drawing a conclusion.
As for an EA, I know nothing about them and will continue to try without. The best EA you can dream of is between pour 2 eyes. It only requests you to think in probabilities, provided you have an edge.

Best

Hi Muntu,
Thanks for taking the time to share your thoughts, and for your charts. I have to reluctantly agree with you (not because I don't want to, but because I fell for all the hype that we are all bombarded with by shysters, that an EA will make you rich overnight; only the vendor becomes night overnight!) that the best EA is between our ears!
I am also coming to the conclusion that trading with the gap is not the panacea I thought it would beAs we progress through our trading journey, we discard various indicators and ideas that don't work (for us) and slowly come to an understanding of what really moves the market (apart from fear & greed), and in my opinion that is:- a. where the bank customers buy/sell orders are and b. that the banks periodically have to re-balance their currencies, otherwise they end up with too much of one currency, leaving them overexposed like a store keeper with too much of one product! Not forgetting volume, of course, the one indicator that the banks cannot fool us with, as it costs them to fake volume!

You may like to visit the Metaquotes site articles about cluster indicators http://articles.mql4.com/484 and http://www.mql4.com/search#!keyword=cluster Some interesting stuff there. I attach a pic showing an example of cluster indicators in action. You will see from Powerlines indicator that the USD is coming down and AUD has flattened out, and from CC that USD and AUD are moving towards each other. Hopefully they will intersect (where there will be indecision) and hopefully they will continue in opposite directions.

This is a bit off-topic for gap trading, so I may start a new thread.

Regards

Who's trading the gaps today?

There is bank holiday in Japan, so if we have gaps on Yen pairs, that might be a good opportunity!

Big gaps on AUD! (market opens 1 hour earlier on Exness)
I know we have a news coming up, Home Loans monthly, but I think 60 pips+ is an exaggerated movement! I am taking shorts positions on EURAUD.

interesting aproach!

Hi

Many traders try for holy grail trading indicator. I too tried to redevelop one. I feel it is quite impossible to develop of that kind, but I have confidence of developing a "HOLY GRAIL TRADING SYSTEM" with a few conditions. Now i am working on that . You can think why should i talk about holy grail trading system in the GAP FORUM. Yes when i started develop a system, i found that my system did not miss not even a single gap. In India GAP comes often in the NIFTY50 Index.

Bala

Hi everybody... this is my first ever post. Does anyone know why there are no weekend gaps on the majors the last couple of months? Someone told me it's because of the Ukraine crisis. What do you think?

thanx

Its been a long time after I created this thread. So there are some interesting findings.

Seems that following the gap direction is more profitable than going opposite as per the original method.

I've been developing in MT5 and not so much in MT4.

I observed that gap trading depends heavily on the broker you use. Those who are making money from this method can share what brokers you are using?

Hi doshur

thanks for your reply. I'm using Teletrade since last May and all the gaps since then were filled up, except the one on EUR/USD two weeks ago. Of course I have to mention that the gaps these four months were not many neither big. However right now at the moment I'm writing this reply there is a huge gap of 130 pips on GBP/USD. I'm in with 3 longs and hope it will close.

Gap trading, that's interesting, we have a over-the-weekend gap in cable this weekend, I got to find out more about Teletrade.

I have been testing the Sunday gap for some time on a few pairs and I was wondering if ts it possible to create EA with the following inputs (that can be changed to fit the different pairs). I checked some already existing EAs but they do not allow to modify all the inputs and also none of them takes the spread into account

Trade to fill the gap
- open trade only if gap is bigger than X pips
- open trade only if spread is smaller than X pips
- risk per trade 2% of account

Stop loss. Two cases
- if gap is between X and Y pips, then SL is set to SL=Gap size +the current spread (spread should always be taken into account when placing the SL)
-if gap is more than X pips then set SL to SL =10pips + the current spread

Would be nice if its possible to have the SL flexible to fit different rules. For example, if the gap is between 5 and 10 pips..SL is gap size + spread. IF gap is 11-20pips....Sl is fixed at 10 pips...if between 21 and 50 SL is fixed at 20..and so on

Good day GAP traders,

I have read all the postings in this thread and find it interesting. In my experience I do better with the DAILY TF. I look for the indicator to ARROW signal a direction but not enter immediately. To me I am willing to let the first day go by and if the indicator was CORRECT in its prediction then I am willing to take on DAY #2 in the direction indicated by the arrows. I also basket trade with this concept and have done well. I use SL but DO NOT use TP but followup with a manual SL or if going to bed, a TS instead. One more thing, paying attention to PIN BARS IN THE DAILY TF can really pay off. Here is my latest win in that regard. I also favor PENDING ORDERS and try to let the price action sweep me in, less stress in my opinion.

Hello Gap traders,

I have found a few pairs that I would risk a trade on with a STOP LOSS IN POSITION. Normally I would position trade above the price and there is no GAP to temp others. The trend has been heading up lately so lets see what happens.Attachment 1923176

I wanted to post two charts in one response but I am doing something wrong and it will not let me do it therefore the double post.

This is what I am looking for in a trade,
Double line change of direction
Pull backs against the line change to set up PENDING ORDERS ABOVE THE DOWN BARS AGAINST THE DOUBLE LINE UP TREND. And most importantly STOP LOSS SET, JUST IN CASE I AM WRONG!! There are allot of charts in the down mode that are showing GAP UP ARROWS, BE CAREFUL, COULD BE A TRAP. Until they make the DOUBLE LINE CHANGE TO GREEN, I feel better placing PENDING ORDERS TO THE DOWNSIDE.

Here are some PENDING ORDERS AT THE BOTTOM OF THE CHART TO PONDER OVER.

ALERT!!!!

There might be a change of direction coming for this pair. PENDING ORDERS ABOVE MIGHT NOT HURT TO HAVE READY.

Here are some gifts, , , ,

Aleart!!! Positions exploding. Take a look. Please look at "PENDING POSITIONS BELOW CHART. Not to late to take a position. Look to the left at the last time it took off. Should give you a clue as to the possibilities.

Hello Gap traders,

As you can plainly see there are no GAPS but that should not stop us from taking a favorable trade. Not only that but when a GAP ARROW FAILS ITS PROJECTED DIRECTION ITS CAUSE FOR A REVERSE TRADE POSSIBILITY. Lets concentrate on one pair, USE/JPY, please note I take two positions per chart. One BUY/STOP PENDING, one SELL/STOP PENDING AT THE SAME TIME. Along with my STOP/LOSS POSITION it sets me up for a SLAM REVERSAL BY THE BIG BOYS. So on this chart I have moved my STOP/LOSS UP TO LOCK IN MY PROFIT NO MATTER WHAT HAPPENS TODAY. Its a FREE TRADE NOW. It is 3:45 PST in California and a new bar is forming since 2:00 PST. This next bar should be a money maker in my opinion. I find that TUESDAYS are serious moving days and we are forming that right now. We will see. Look to the left the last time it made a move like this.

New positions taken, look at basket of currencies bought. Almost at my limit to own.