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6,362 posts
msg #56082
Ignore TheRumpledOne
10/27/2007 2:20:18 PM

/* gap fill statistics */

set{Xgapped, open - close 1 day ago}
set{Xgapup, count(Xgapped > 0, 1)}
set{Xgapdn, count(Xgapped < 0, 1)}

set{absgap, abs(Xgapped)}

set{gappedup100, count(Xgapup > 0, 100)}
set{gappeddn100, count(Xgapdn > 0, 100)}

set{cl1lo, close 1 day ago - low}
set{hicl1, high - close 1 day ago }

set{fillup, count(cl1lo > 0, 1)}
set{filldn, count(hicl1 > 0, 1)}

set{gapupfilled, Xgapup * fillup }
set{gapdnfilled, Xgapdn * filldn }

set{gapup100f, count(gapupfilled > 0, 100)}
set{gapdn100f, count(gapdnfilled > 0, 100)}

set{gapfilled, gapup100f + gapdn100f}




and add column gappedup100
and add column gappeddn100
and add column gapfilled
and add column gapup100f
and add column gapdn100f

and add column cma(absgap, 100)
and add column absgap 100 day high
and add column absgap 100 day low

/* profit checker - long only */

set{ LongProfit, high - open}
set{Long10, count(longprofit above .10, 100) }
set{Long50, count(longprofit above .50, 100) }
set{LoseLg, Long10 - Long50}

add column LoseLg
add column LongProfit
add column Long10
add column Long50

and add column cma(longprofit, 100)

/* profit checker - short only */

set{ ShortProfit, open - low }
set{Short10, count(Shortprofit above .10, 100) }
set{Short50, count(Shortprofit above .50, 100) }
set{LoseSh, Short10 - Short50}

add column LoseSh
add column ShortProfit
add column Short10
add column Short50

and add column cma(Shortprofit, 100)





I added the long/short profit displays. Now you can see just how much "MILK" these "COWS" can produce.

6,362 posts
msg #56150
Ignore TheRumpledOne
10/29/2007 4:11:50 PM

How to trade gaps in Stock Market Charts

There are four types of gaps :

Common Gap
Breakaway Gap

Gaps are formed on daily bar charts where no trading has taken place. In an upside gap for example, a gap would be formed if the open is higher than the previous bar’s high (Murphy definition). A downside gap would be formed if the open was lower than the previous bar’s low. These initial gapping moves form true gaps when at the end of that trading day the gap is left unfilled. So in an upside gap, today’s low is higher than the previous bar’s high, in a downside gap today’s high is lower than the previous bar’s low.

Common myth: All gaps must be filled. This a very tempting intra-day strategy but is strictly speaking, not true.

Common Gap
This type of gap generally occurs in the middle of trading ranges or in thinly traded markets. Chartists tend to ignore the common gap but futures traders are always keen to use the common gap with the following points in mind:
1.Every gap must be filled – which remember is not strictly speaking true
2.The gap high and low and even the close and open can be used as support and resistance levels.
3.Common gaps offer little to trend analysis or confirmation of a pattern breakout or reversal and are usually ignored by chartists.

Breakaway Gap

This type of gap can occur at the completion of a significant pattern. A breakaway gap gives a strong signal that the market has started a new trend or phase of a trend. This gap has more significance if it is left unfilled, and should remain ‘unclosed’ to have validity. On an upside gap, the high of the previous bar (the gap low) is considered to be strong support. On a downside gap the low of the previous bar is considered to be strong resistance.

1.Breakaway gaps are seen as patterns are completed and stops are triggered, the market may be receiving a ‘shock’.
2.Breakaway gaps can be used as support or resistance as orders will be left at these levels to cut losses or initiate trades.
3.Once the breakaway gap is confirmed (the gap holds on a test) the trend move should be strong.

Runaway Gap
Once the trend is underway prices may leap forward to form a gap or even a series of gaps. This may have some strong volume associated with it. The runaway gap offers the same support and resistance studies that the breakaway gap does.
1.The runaway gap sometimes occurs in the middle of the trend move and can be a ‘measuring gap’.
2.The runaway gap occurs as the trend gathers more ‘believers’, new funds flow into the market to re-enforce the trend.
3.The runaway gap also occurs as ‘stale’ longs or shorts cut their positions and take their losses. This can be on the back of news, shocks to supply/demand, or simply too much ‘pain’ in existing positions.Exhaustion Gap

Once the trend is well established and most targets/objectives have been met, an exhaustion gap may be seen. This will appear like another runaway gap, but the price action will be critical. Basically, once the gap is seen, but is then filled and closed, the exhaustion gap could be in place.
1.Exhaustion gap is seen at the end of the trend move.
2.Exhaustion gap is confirmed as the gap is filled and closed.
3.Exhaustion gap signals a trend change

Island reversals

Island reversals occur when the market gaps higher with an upward exhaustion gap (or lower with a downwards exhaustion gap), trades in a narrow range for a few days and then gaps lower again. This leaves an “island” of prices, surrounded by unfilled space and usually signals a trend reversal.

Opening Gaps are worth watching out for in intraday trading, but dont get too obsessed with them!!

6,362 posts
msg #56151
Ignore TheRumpledOne
10/29/2007 4:13:52 PM

Price Gaps and Gap Analysis
> Traders_Lab

By Guy Bower of*

Price gaps are a common occurrence on charts, and, yet, all too often, the technician glosses over their significance or misinterprets their meaning. Let’s first begin with a definition: A price gap is an area on a chart (bar or candle) in which there are no trades. Gaps (“open spaces”) can occur for a variety of reasons and should be watched carefully because they may be an indication of a significant change in the underlying market conditions or psychology of the market.

Gaps can appear on long-term weekly and monthly charts, but are more frequently found on daily charts. A gap occurs because there is a significant market development in which price rapidly changes, and no trades occur between the initial point and the next subsequent trade point. For example, a terrorist attack may result in gold or oil prices gapping higher, or an announcement of chapter 11 proceedings may lead to a stock gapping lower.

There are 4 types of gaps that the technician needs to be aware of because each has its own interpretation.

Screenshot 1
Common Gap

As the name suggests, common gaps are generally of no significance; they are frequently found on price charts. They can be caused by a stock going ex-dividend. Common gaps are generally “filled” within a short period of time. Filled is the common term for when the price retraces back to the previous level and closes the gap. It is important to be able to recognize common gaps and not fall into the trap of thinking that they are signals of market strength or weakness.

Breakaway Gap

Breakaway gaps are the ones that astute traders watch for because they can be used to identify the beginnings of a trend. Let’s first look at where we find this type of gap. Generally speaking, breakaway gaps occur at the completion of an important pricing pattern and signal the commencement of a significant market move. Markets often get caught in congestion areas (i.e., an area in which prices range trade for a short period of time as prices fail to penetrate support and resistance levels).

To break out of theses areas requires market enthusiasm (either positive or negative) or a fundamental development that causes prices to “break out”. Breakaway gaps usually occur on heavy volume. A stronger signal is given if volume does not build until the gap occurs. The point of the breakout now becomes the next support level (upside breakout) and resistance (downside breakout).

It is important at this point to correct a myth commonly associated with gap analysis that “gaps are always filled”. This simply is not true. As a rule, breakaway gaps are not filled because the market has shifted direction.
Runaway Gap (aka Continuation Gap)

After a market has found direction and the trend is established, it is common for a runaway gap to occur. The reason this type of gap develops is that interest in the market increases as traders waiting for the pull-back give up and decide to buy in instead.

In an upward trending market, runaway gaps are a sign of strength and, in a downward tending market, a sign of weakness.

Runaway gaps are used by some traders as a way of “measuring” how much further a trend has to run. The most common method is to use the distance from the start of the trend to the gap as the half way point on the length of the trend.
Exhaustion Gap

Exhaustion gaps are those that appear near the end of the trend and occur after the other two types of chart gaps have been identified. They are identified by high volume and large price difference between the previous day’s close and the new opening price.

They are often mistaken for a runaway gap rather than as a signal that the trend is nearing an end.

Exhaustion gaps occur as the market enters a state of panic and prices move sharply; investors pile in on the idea that the market is about to run away rather than correctly seeing that the trend is almost complete. Exhaustion gaps are identified by the exceptionally high volume of trading and the fact that the gap is filled within a short time frame (i.e., when prices close under the last gap). Exhaustion gaps are a signal that the market is at a turning point.
Hindsight Is 20 / 20

Price gaps can signal the start of major uptrends or downtrends. Traders also use them to predict how high or low prices will go. However, gaps are most useful and easily identified and understood after the market is over. Labeling gaps by type beforehand is, then, an inexact science at best.

6,362 posts
msg #56152
Ignore TheRumpledOne
10/29/2007 4:14:22 PM

17 posts
msg #56194
Ignore rwgamer
10/30/2007 12:38:32 PM

From what I've read, I would say this is the order from most likely to least likely for a gap to be filled:

1. Exhaustion Gap
2. Area or Common Gap
3. Continuation Gap
4. Breakaway Gap

CF and GRP were nice ones today. CF could probably be labeled an exhaustion gap.


17 posts
msg #56197
Ignore rwgamer
10/30/2007 3:43:21 PM

I've been paper trading for several months trying a bunch of different strategies and had already figured out that "Fill the Gap" was producing my largest gains with a high win ratio. Now that I've added in the statistics filter from TRO, I think my win ratio will improve even more. I'm getting ahead of myself because I want to manually trade for a good period of time before automating, but I'm curious if you have this filter coded in TradeStation TRO? Stockfetcher's programming language seems much more primitive than TradeStation's. It's kind of annoying how you keep having to use new variables with set statements instead of just performing an operation on an existing variable. For example I can't say varpercent = varpercent*100 in Stockfetcher. Also the data is delayed by a variable length. On most days the latest data is shown at 10:05EST, but sometimes it is later for some unknown reason.


6,362 posts
msg #56199
Ignore TheRumpledOne
10/30/2007 4:28:32 PM

I don't code "filters" in TradeStation... That's what StockFetcher is for.

I code automated trading strategies and indicators for TradeStation.

If you want to trade this successfully, then pick ONE stock and trade it over and over and over again, day after day after day.

If you only get ONE trade a day, DO NOT BE TEMPTED TO LOOK FOR MORE. The secret you must learn is LEARNING HOW TO WAIT FOR THE TRADE.

Look at AAPL today for an example.

Image and video hosting by TinyPic

Just waiting for the price to enter the long or short zone pays off.

You don't have to guess tops or bottoms.

The price will move from open to high and from open to low and if you enter the trade in the zone, you can capture the profit. This is TOO SIMPLE for most to grasp because you don't need indicators or fancy math.

6,362 posts
msg #56200
Ignore TheRumpledOne
10/30/2007 4:35:28 PM

Image and video hosting by TinyPic

RIMM.. simple trades, simple profit.

See the gap get filled!!

17 posts
msg #56202
Ignore rwgamer
10/30/2007 5:49:24 PM

TRO: "I don't code "filters" in TradeStation... That's what StockFetcher is for. I code automated trading strategies and indicators for TradeStation. "

Well if you could code everything including the stock selection process, you could vacation in the Bahamas while your computer is trading for you. I haven't used TradeStation, so I can't tell you if it's possible to write an equivalent filter using their EasyLanguage or whatever they call it. Of course you would have to have redundant everything, a failover Internet connection, backup'd pretty much be running a data center. Or maybe you could just hire somebody to make sure nothing crashes.

I'm just thinking outside the box here.

I do intend to create a bunch of basket stocks that have filled the gap a high percentage of times in the past--but no stock is going to gap up or down a significant amount every day. I know you scalp based on your previous posts, so a .4% gap IS significant to your trading style.

6,362 posts
msg #56204
Ignore TheRumpledOne
10/30/2007 6:31:20 PM

Image and video hosting by TinyPic

Seeing is believing.

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