On a Journey........

Discussion in 'Index Futures' started by lilduckling, Jan 5, 2006.

  1. Hello, I, like a raving mad lunatic, am on an insane journey to find what causes the YM gaps to fill. Already i have found some clues.... but they are nothing that would warrant basing trades off. Now i know there is data out there with several gap ranges and the percentage of them filling based on the day of the week, etc. Thats not what im looking for. I want something real..... something raw that i can put my fingers on.

    This is what i have concluded so far:
    There is no indicator available that can aid in determining wether or not the gap will fill. By this i mean at the open of regular mkts ((9:30am). Indicators do help... but only after there is enough trading time for them to work properly. I am in search for something i can have in a spreadsheet....with statistical data that at the open will give me some numbers. Indicators are not the way.
    News can not be used. There is no way to classify wether news items are positive or negative, since YM can rally on good news or bad. Its all expectations.... something that can not be classified.

    All i have left is the statistical data of gap fills. To me that doesn't tell you much.... since you don't know what is behind any of it. I myself have already gone further than that in the fact that i have put together some data on how long it takes for a gap to fill depending on its size. I am also aware that morning volume... and premarket volume on key sectors and stocks also have some bearing... but only minor. What i need now...... what is driving me mad... is i need mkt conditions to go with that data!!
    And so i have started this thread. It is my hope that others looking for this data and who are serious, will post their thoughts here.
    Please only post if you have thoughts in this subject. I would like to exchange thoughts on this matter.... i am curious what others feel about this.

    PLEASE.... NO "don't TRY TO GUESS THE MOVE, JUST TRADE ON WHATS HAPPENING".....comments. For the last 10 months, YM has been gapping in the morning....and almost like clock work has filled the gap in the same day!! I am not looking for an easy answer.... just looking for something that is worth me using in my spreadsheets.... i will then have to go back, day by day, collecting that data and then using it in my calculations. I have spent long days and nights trying to have more reliable calculations..... want a solid foundation for my database.

    So fellow YM traders that play gaps.... any thoughts, issues, or clues will be appreciated.
  2. fader


    gaps (and gap fills) are a function of volatility - volatility is primary, i.e. if there is zero volatility, there will be zero gaps... - study historical volatility vs gaps/gap fills and you will see the connection - i have done some work recently on a different subject, but related to volatility: as a simple example, the attached chart shows a rolling average % of overlap between sequential daily bars (i.e. overlap between the current day bar and the next day bar), using Dow cash prices - see how the % overlap has gone up and is staying up in the last couple of years, i.e. the daily bars are relatively more clustered, i.e. lower volatility / more gaps filled - all the best.
  3. Very interesting fader....thanks. I will work it in my calculations.
  4. Instead of searching for an answer just trade it, The majority of my trading comes from fading gaps and it works quite well in YM, but always use a stop because once and a blue moon you will get a break away gap that does not fill for a few days. When I refer to a gap, I am talking about the spread between ym and the dow's previous close, not where YM opened at.
  5. QUOTE]Quote from volente_00:

    Instead of searching for an answer just trade it, The majority of my trading comes from fading gaps and it works quite well in YM, but always use a stop because once and a blue moon you will get a break away gap that does not fill for a few days. When I refer to a gap, I am talking about the spread between ym and the dow's previous close, not where YM opened at. [/QUOTE]

    Volente.... its either i just trade them or i put a revolver to my head.... cause i just can not find what im looking for. I desperately was searching for clues to what makes some gaps fill and others not fill. I looked for factors such as... MAs, TRINS, time of year, previous days range, and EVERY single indicator available to me from eSignal...... i found no correlation. I do have statistical data from now to July of last year..(as far as eSignal will go for intra-day)... i calculated how much a gap will rally before it begins to fill based on its size....and how long a gap takes to fill also based on its size calculated with intra-day $VOLD. But only having data to July is pretty much meanless.
    I have to resort to go with what i have .. which is the old standbys... odds of a gap filling based on its size and day of the week. Oh by the way..... Thursday has the highest odds of filling right?.,.... But i did something different...I counted Thursdays as a Friday IF it happened to be the last trading day of the week...like on holidays, etc. Also did it with Mondays. When doing that.... I came up with Wednesdays as having the best odds to have a gap fill. Interesting no?

    I have wasted so many days trying to find some kind of correlation.....all for nothing... just one big goose chance. So i been depressed. I imputed 1000's of formulas in excel..... for nothing.

    So looks like i just gotta trade the gaps like you said.
    But damn if i didn't want some data to back up what i see.
  6. K-Rock


    Keep it simple. You should look at gaps relative to previous day High, Low, and Close.
  7. K-Rock


    I posted the following on another tread:

    ...I noticed if price is gapped up or down, at the open of the market, by more than 3 ES e-mini points from the previous close and is above or below the previous day high or low, price will more than likely continue to trend in that direct, after the opening pullback...


  8. BTW

    why are you trying to trade gaps?

    low reward trades, waste of time.

    Gaps in indexes are not the same as gaps in stocks.

    Gaps in stocks are important because of demand imbalance.
    Gaps in indexes are not important considering the market "traded" up there overnight.
  9. Pekelo


    Pekelo's rule of thumb: 2nd gaps always get filled on the same day.

    Definition of 2nd gap: a gap in the same direction as a previous one not longer than 1-3 days earlier....

    You can put this up in the Rules Hall of Fame....

    A fine example was today, when we had a downgap just like yesterday and it did get filled the same day.

    I would like the $5s to my paypal account, thank you.... :)
  10. LOL... i saw todays gap coming a mile away.... snatched a quick 12 pts.

    Its also my understanding the gaps w/ best odds are counter to the short term trend.
    I noticed that the last few weeks we have been getting mostly gap ups...which then fill. Last few days during this rally... we been getting gap downs.... which also fill....as far as run away gaps... i must rely on mkt eternals to tell me when a gap is a pro gap.

    coolweb.... the reason i dwell on gaps is because some of them have as much as 86% chance of filling. Those are odds too big to ignore. Most loose $$$ on gaps because there stops are too tight. Also most institutions don't commit to the market until the morning gap is out of the way....which only fuels the self fulfilling prophecy. hence gap fills are done on low volatility. Gaps occur at least once a week.
    INDEX gaps are different from stock gaps....very different. I wont go into it here but... if you play stock gaps you better know why its gapping.... forget about past odds... you will get burned because these rules don't apply to stock gaps. Too subjective to manipulations that start off herd mentality trading.
    Having said that...... i did play stock gaps and made money... but only when those gaps came as a shock to a large committed bears / bulls. EX:.... a stock has a nice up day.... next day has an ever bigger run... and on the 3rd or 4th day it has a green large wide range bar with huge volume..... only to gap down the next day..trapping the majority of buyers in the last 1 or 2 days....and depending how it trades the 1st 30min, i usually would be shorting there..... going with the gap... unlike trading the YM to fill. There's also the breakout gaps.... just too much to list on here.... but to sum it up...ALL gaps must have rules one needs to trade by.
    #10     Jan 5, 2006