| StockFetcher Forums · Filter Exchange · FADING THE GAP STATISTICS FILTER | << 1 ... 10 11 12 13 14 ... 40 >>Post Follow-up |
| TheRumpledOne 6,529 posts msg #56151 - Ignore TheRumpledOne |
10/29/2007 4:13:52 PM Price Gaps and Gap Analysis > Traders_Lab By Guy Bower of www.guybower.com* 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. http://ragingbull.quote.com/bullseye/node/229 |
| TheRumpledOne 6,529 posts msg #56152 - Ignore TheRumpledOne |
10/29/2007 4:14:22 PM http://www.investopedia.com/university/charts/charts8.asp |
| rwgamer 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. Rick |
| rwgamer 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. Rick |
| TheRumpledOne 6,529 posts msg #56199 - Ignore TheRumpledOne modified |
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. 
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. |
| TheRumpledOne 6,529 posts msg #56200 - Ignore TheRumpledOne |
10/30/2007 4:35:28 PM
RIMM.. simple trades, simple profit. See the gap get filled!! |
| rwgamer 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 computer...you'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. |
| TheRumpledOne 6,529 posts msg #56204 - Ignore TheRumpledOne |
10/30/2007 6:31:20 PM
Seeing is believing. |
| TheRumpledOne 6,529 posts msg #56205 - Ignore TheRumpledOne |
10/30/2007 6:35:01 PM rwgamer... with all due respect, I have been working on this since 2002. THIS WORKS! If there is a HOLY GRAIL, THIS IS IT! Automation is NOT the same as unattended... someone must be watching. It's simple, I run stockfetcher to get my COWS. They don't change much. I take the top 20 and load them into TradeStation. You see the results. These stocks have the range and volume needed to produce "milk" everyday. Vegas would kill for these odds. |
| TheRumpledOne 6,529 posts msg #56206 - Ignore TheRumpledOne |
10/30/2007 6:38:34 PM "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." I don't care about percent. All I care about is price. When a computer is trading, you have to think like a computer. If the computer trades 20 stocks a day and nets $.10 per share per stock, that's a net $2,000 a day or $500k a year. There is no need to be greedy. I don't care how much it could have made. Hey brother, can you spare a dime? LOL!!! |
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