The system tests well for gold futures also: Number of trades 6 Total profit $ 189583 Profit after subtracting $ 10.00 commission, slippage per transaction: $ 189463 Heat is 2.00 per cent of equity. Greatest drawdown is 0.0081 (0.81 per cent). Cumulative Annual Growth Rate (CAGR) is 6.20 per cent. CAGR / Drawdown is 7.62 Instantaneously Compounding Annual Growth Rate (ICAGR) is 3.48 per cent. Annually Compounding Annual Growth Rate (ACAGR) is 3.54 per cent. Information Ratio is 0.65 Initial capital is $ 100000 Margin is 20 %. Long trades only. === Weird. Apparently there are no minimum 0.2 % gaps to higher price since Match 1980. It is possible to trade this system shorter term. Using a 2 period moving average and 0.1 % minimum gap the system shows about a - 1 % growth rate and greatest drawdown is about 32 %.
This study isn't a computer program calculation but rather my observations from 100+ charts. I'd try to answer questions like: 1. after a gap day, when will the stock pull back?, for how many days, and by how much? 2. If, after a gap-up day, the stock closes higher, should you still short? 3. on a breakout gap, on the following 3-5 days, did the stock close higher or lower? things like that.
Spend a little time on this question: What is the best signal to use to determine the advent of a gap in the time period before the gap appears? Here is a neat trading technique (Senters and Carter) for YM gaps down. I'm pointing it out just because it will help counter the gap up stuff you are doing after getting beatup by GROW. 82% of days that YM gaps down, it retraces 50% of the gap by EOD. What trade do you do if it doesn't? So gaps are infrequent. Why chase around after them? What would it be like to have a list everyday of something to trade? Like before the price begins to move. It is a pleasant way to start the day.
Sounds like a great study idea. One thing to define right up front is "this is what I call a gap". As obvious as it might sound, there are a few different ways of defining a gap. By defining "gap", no matter what anyone else might call a gap, *your* gap is what your study is about. "Opening Gap" is usually Todays Open vs. Yesterdays close, but here is an image that touches on other gap views: <a href="http://versaluna.com/ensign/images/amgGAPLap.png"><img src="http://versaluna.com/ensign/images/amgGAPLap.png" width="100"></a> Another resource you might enjoy is <a href=http://traderfeed.blogspot.com/2006/11/do-opening-gaps-tend-to-fill.html">this article on opening gaps </a> by Brett Steenbarger. Looking forward to your results. amg
I suspect you are correct, Jack. I remember testing two versions of the same method on Euro / US Dollar exchange rate. One version enters immediately following an opening gap, the other method enters when the price rallys a given percentage. Both methods use the same trade exit and position size rules. The non-gap method shows about twice the profit with far fewer trades. Greatest drawdown in both cases is about 1 %. Waiting for gaps might mean missing profitable trading opportunities.
Second gaps (when the same direction gap wasn't filled the previous day) get filled 90% of the time the same day...
What might be interesting is a volume study during the open and close if there is one the chart? Akuma
http://www.stockfetcher.com/stockdb/fetcher?p=forum&sub=view&fid=1002&tid=45054&start=70 good base with some tweaking as needed. Keeps the odds in your favor.