Gap Traders out there (need some advice about losing trades) | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

I'm a noob and need advice on managing a losing trade 28 replies

Need some updated advice on ECN no DD broker 21 replies

Need some advice 17 replies

Trade Management EA - Need some advice 17 replies

New Joinee - Need some advice 6 replies

Attachments: Gap Traders out there (need some advice about losing trades)
Exit Attachments

Gap Traders out there (need some advice about losing trades)

  • #1
  • First Post: Edited 8:51am Aug 4, 2016 8:32am | Edited 8:51am
hey folx ...

i just testing (on demo) a gap trading strategy .. which simply follows the spikes on opening and then short/long back to the gap (usually i go for between 40 and 70% of the gap size .. this is very much depending on previous days

i managed to double the money in just 6 days (not kidding .. put on 700USD .. todays it 1560USD) .. however i did not loose yet.

the problem is "how to manage loosing trades" ... what rules would you choose.

on my live accounts i use cTrader and simply ajust the lot size so it always is not more then 2%
but on this kind of trades this is not really possible .. as i hard buying against the price rise or drop (depending on gap up or down)

basically it works like this
lets a assume a Partial Gap UP with 25 Points.

however on opening the price usually does rise VERY FAST upwards ..
every time it does slow down or i see a Bearish Candle in the Tick chart .. i go short
usually this happens 2 or 3 times until the price actually starts to drop .. so the first 2 Shorts will be large in Minus until that happens.

well large is relative .. but i think you get the idea

attached is a screenshoot from yesterday where you can see what i mean
all position will open largely negative exept of the last one (which is fine for me ... as its supposed to be like this)

however if i falsely catch into a "gap-and-go" this would end very badly ..

so i guess the main question is .. how can i safely identify a true Gap-and-go from a retracement Gap in a matter of seconds ..
and where would you accept the decition to buy into the gap was wrong and reverse ?

i had it 2 times where it took 4 hours for the gap to close and i had a 32% drawdown on that day, however .. everything went like planned in the end .. and i got my profit.

but how do i know that ?
is there any candle formation or behavour i could look for to confirm its a gap-and-go or it will just take some time till the retrace does happen ?
Attached Image (click to enlarge)
Click to Enlarge Name: daxwe.png Size: 46 KB
  • #2
  • Edited 11:39am Aug 4, 2016 8:45am | Edited 11:39am
here is a example of a "questionable" situation

the close of the gap took MUCH longer.
i made 4% plus on my account that day and the gap was closed as expected ..

however this could have been just a Gap-and-go scenario .. (i was simply lucky i guess)

i can not see a difference between a real gap-and-go and a opening where the price simply takes it time to come back

my wendsday trades where the price took 6 hours or so to come back.
Attached Image (click to enlarge)
Click to Enlarge Name: gapbutnotgo.jpg Size: 111 KB

P.S. sorry about the screenshoot does not show the close of the gap (it did happen later on, i just did not have the balls to wait for it an exited the trades early .. cashing in a 4% account grow instead of a 22% )

and a true Gap-and-go (its still open 10 days later)
Attached Image (click to enlarge)
Click to Enlarge Name: gapandgo.jpg Size: 109 KB


both look pretty much identical to me ..
  • #3
  • Aug 4, 2016 11:10am Aug 4, 2016 11:10am
Quoting nullx8
here is a example of a "questionable" situation the close of the gap took MUCH longer. i made 14% plus on my account that day and the gap was closed as expected .. however this could have been just a Gap-and-go scenario .. (i was simply lucky i guess) i can not see a difference between a real gap-and-go and a opening where the price simply takes it time to come back my wendsday trades where the price took 6 hours or so to come back. {image} P.S. sorry about the screenshoot does not show the close of the gap (it did happen later on, i just did not...
There is no difference really, and the reason Gap's closes at a 95-99% rate(depends on how far you look back) because there is no time limit on when the gap needs to be closed by. Really any price that has already occurred has a 99% chance of being revisited eventually, whether it is a gap, or not. The key to trading these strategies is managing risk so you can survive long enough for this to happen and continue to grow your equity while you have these floating losses.

Another key to trading like this is to only trade pairs where you receive a positive swap. If you end up holding on to a trade for 1-2 months waiting for the gap to fill you have all of your profit eaten up by the swap rate if you are trading against it. On the contrary, if you hold in the direction of the positive swap rate, the trade will still be generating profit via interest even as it's floating in a loss. And most times you generate more than enough interest to cover the spread and more.
  • #4
  • Aug 4, 2016 11:35am Aug 4, 2016 11:35am
Quoting Sis.yphus
There is no difference really, and the reason Gap's closes at a 95-99% rate(depends on how far you look back) because there is no time limit on when the gap needs to be closed by.
thats VERY true!

i do that only on IT40 and DAX ... the "problem"is there .. if i get into a gap and go while have bought somewhat 10 contracts against the direction i would end up VERY fast on a margin call .. as most of the time the price does skyrocket ..

also iam psycologically not (yet) strong enough to just hold on to somethings that keeps raise ..

i have 2 pending order still open on some older gaps .. and every time i go to the Order tab in cTrader and see "distance: 5000 pip" i feel like "glad i did not buy into that one" well okay this one was against my ruleset anyway .. so i did not buy it because there was no setup placed the pending order instead.

but i found in the history setups i would have taken and they would have ended up badly or caused serious Drawdown.

making the story short: if i would/be able to manage the loss to be less than 30% .. i would still go for the strategy.
as the earnings are much larger and the loosers are quite rare.. so i can basically live with a large loss ... it may hurts or look bad .. but who care if the end of the month is positive after all.

i think my main problem is that everything does happen quite fast (in 70% of the times) ..

if it does not .. then the worries getting very great very fast, because we never know it mutating to a gap-and-go .. or it simply take its time.

Quote
The key to trading these strategies is managing risk so you can survive long enough for this to happen and continue to grow your equity while you have these floating losses.
exactly, thats another issue because this trading strategy is totally against my usual 2% rule, if the price keeps growing .. that can easy go to 30% and on the end of the day i still have the planned winning ...
but if not .. at the end of the day the losses are just too great.

thats why i still seeking for some hint someone may know .. or a rule that can be aplied to that in order to minimize this a little bit.
  • #5
  • Aug 4, 2016 11:44am Aug 4, 2016 11:44am
Quoting nullx8
{quote} thats VERY true! i do that only on IT40 and DAX ... the "problem"is there .. if i get into a gap and go while have bought somewhat 10 contracts against the direction i would end up VERY fast on a margin call .. as most of the time the price does skyrocket .. also iam psycologically not (yet) strong enough to just hold on to somethings that keeps raise .. i have 2 pending order still open on some older gaps .. and every time i go to the Order tab in cTradert and see "distance: 5000 pip"i feel like "glad i did not buy into that one" well okay...
You can easily manage the loss to be less than 30%. I don't trade a gap strategy but I do trade something similar in one of my accounts and they key is position sizing. My position size is so small that a 1000 pip move against me is not even 10% of the account. So in some cases, a currency would actually have to go to 0.0 for me to wipe the account on that position.

I understand that when the price does run against you, you can begin to fear that it will never return, and in some extremely rare cases, it will not return. But if you manage your size and double you account trading other pairs while the loss is still floating, the loss will grow smaller and smaller relative to your account as your balance continues to grow and eventually it will get to a point where it's so small that you can close it out and only take a tiny loss.
  • #6
  • Aug 4, 2016 11:47am Aug 4, 2016 11:47am
Quoting Sis.yphus
the reason Gap's closes at a 95-99% rate(depends on how far you look back)
well statistically 81% of the gaps close in the next 36 hours (well thats what statistics say)
lets just say for the sake of a example: 8 out of 10 work out in a timely fashion without the need of a million $ equity to hold them that long.

makes 2 losers and this 2 need to be managed in some way ... but thats where my knowledge simply ends ..
- getting out to early most likely would give me a lot of regrets
- getting out too late would be simply too expensive and rendering the whole strategy worthless.
  • #7
  • Aug 4, 2016 12:04pm Aug 4, 2016 12:04pm
here is another good example (from today)
the gap was almost overlapping a gap from a few days before so i skipped that one.
but the pending order from the gap before was executed and luckily it was filled by just 1 pip

4 hours later the current gap got filled in full as well .. made me very upset ..
as i could swear this is going to be a Gap-and-go due to the older gaps closeby.

well better safe than sorry (i guess)
Attached Image (click to enlarge)
Click to Enlarge Name: it40.png Size: 21 KB
  • #8
  • May 11, 2017 11:18am May 11, 2017 11:18am
Where did you get your data that 81% of Gaps close in 36 hours? I have an EA that trades the Gaps in the Forex market, do stock exchange index's close at the same rate? Since they have a Gap each day compared to forex which has a gap only once a week.
  • #9
  • May 13, 2017 8:05am May 13, 2017 8:05am
Quoting Pvmforex
Where did you get your data that 81% of Gaps close in 36 hours? I have an EA that trades the Gaps in the Forex market, do stock exchange index's close at the same rate? Since they have a Gap each day compared to forex which has a gap only once a week.
forex gaps are way to small and too rare.

i trade gaps in indicies mostly ..
but not all indicies behave the same !!!

it works pretty well for the Dax tough (FDAX)
  • #10
  • May 13, 2017 4:15pm May 13, 2017 4:15pm
How do you mange risk to effective trade the GAP on the DAX
  • #11
  • Last Post: May 14, 2017 12:01am May 14, 2017 12:01am
Quoting Pvmforex
How do you mange risk to effective trade the GAP on the DAX
Hedge on the point where the go is clear. Leave the orders open till price comes back, no more drawdown.
0 traders viewing now