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I usually don't do this, but for fun I thought I'd share my gap trading plan for tomorrow. These are set up to trade automatically at the open if the setup is there.
ES: If open between 1,182.00 and 1,183.25 go short at the open with a market order, target 1180.75 with a 5pt stop
YM: No trades
NQ: If open between 2,106.75 and 2,112.50 go short at the open with a market order, target 2,104.00 with a 12.5pt stop
TF: No trades
Feel free to play along...
...Monday Morning...
ES opened too high so no trade. NQ opened in the zone but stopped out near the morning highs.
Scott, I hope you'll continue to post your journal here after the new year.
One thing to consider, there will be a dramatic change once your journal is no longer publicly viewable. The psychology of this is amazing. So just bear in mind, part of the whole "transparent" thing is the added benefits you receive by being so transparent.... when/if you go to a private journal, you lose a lot of those benefits.
Monday, October 25th - We had sizable up-gaps in all 4 indexes, but I only set up to trade 2 of them and only 1 (NQ) triggered. The market roared even higher through my stop then turned around back towards the open. FYI, Mondays are generally bullish and riskier because the gap spans an entire weekend.
I assume you've tried some better logic on the entries without success?
The goal being to simply get a better fill, nothing radical like deciding whether or not to take the trade. If you look at something like:
- Ok, I would have "normally" shorted at <xyz> (strategy holds this info)
- Look at price <x interval> later, is price higher? If yes, wait some more
- Look at price <x interval> later, is price now lower? Ok, maybe we short here
You might look at it two different ways actually. One is a better price (higher price on shorts). The other is a better "fill" meaning you might take the trade at a similar price your original entry was setup for, but it may be 5 or 10 bars later after price has run up and them come back down.
Yes I am doing some research on the ramifications of better fills. The problem, as I've mentioned before, is that I will miss the gaps that fill quickly without ever getting a better fill, and still get filled on every losing trade, depending on if/how I adjust my stops relative to a better fill, ie, do I still use the same sized stop no matter where I enter? Or keep the stop at the place as if I had entered at the open but now my stop is smaller with a better risk/reward? Also, many trades I take have stops larger than my targets, which I'm not really comfortable with, but I'm making money so maybe I should be OK with it, but psychologically and statistically it feels wrong.
I've started playing with these scenarios in my strategy but haven't made a decision what to change yet. I won't consider changing my plan until after this month is over.
Last night I was screening stocks making bearing/bullish engulfing patterns yesterday on their daily charts among US Equities.
8 made bullish engulfing moves
99 made bearish engulfing moves
If you wanted to create a bullish/bearish engulfing ratio it would only be 0.081 (very low). However, I noticed there were a large number of stocks making new 52-week highs as well, so maybe a lot of these are false reversals in a market up-trend, or, the market is topping out. How would you read it?
Tuesday, October 26th - Markets opened in low-probability x-L zones, below yesterday's lows, so I didn't take any gap trades. Unfortunately, the large gaps filled nicely and quickly, gaining over $170-$490 per contract, depending on the instrument.
As mentioned earlier, I took a long breakout of the NQ. I reached 60% of my target but it couldn't get any higher. I closed the position out at the end of the day for a tiny win.