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You want a few hundred gaps to look at, minimally. Basically, you're looking for biases (which should make sense), not find statistical flukes. Example, in the attached spreadsheet, 4pt gaps filled 86% of the time, 6pt gaps filled 77% of the time, but 5pt gaps only filled 60% of the time. That makes no logical sense, so I'd question the sample size just based on that.

If anyone's going to take a statistical approach to this, make sure you use ample data. The xls attached on the quoted post uses a fairly small sample size. You may come to incorrect or statistically insignificant conclusions with not enough data. Also, the stats analyzed on the xls deal with specific day biases, which from my testing, are not as reliable or exploitable than biases rooted in market conditions (such as technical analysis, etc). It's a good start, but don't fool yourself with faulty statistics.

I'm sure we'd all agree the parabolic price action on the close was interesting. And here we find price back up to the top. $SPX, $NDX, $COMPQ, and $NYA all have similar price patterns. Volume has been declining since the range was established towards the beginning of the month. Springboard? As a note, here's some recent divergences between up and down volume, and price.

I saw this yesterday, most are pretty good tips. 21 Essential Steps to Make Your PC Better/Faster/Stronger | Maximum PC

I know that's how Wyckoff and Dow did it, but it seems that this method weights stock prices that are high (which can be rather arbitrary) much heavier (e.g. ACME is at $50, DYNO is at $20, both are similar sized companies, but ACME is weighted in the index 2.5x greater). It could be that normalizing the data was too computationally intensive in the early 1900s. I'm sure it's not a huge deal, or Wyckoff would have given it some notice, but it might give a better picture of the constructed index.

*ahem* :rofl: .................

I have a decent amount of experience here, so will share some if anyone wants to look into this. I have an automatic strategy that trades gaps on ES that has a fairly impressive track record. This isn't my primary method of trading, but was one of my first statistical looks at markets, and has helped smooth out the P/L curve. It trades using statistical biases I've found, and only actually attempts roughly 20-25% of the time (but it's actually highly accurate, and has a good r:r). In turn, many of the "gap and go" days are filtered out. For those who are statistically inclined, here are some things to look into regarding statistical biases for gaps. Remember, if the gap filled or not is only one side of the coin. Also look at the bias in context of the gap size and risk. Is the general market trending or congesting? How big is the gap? (I have filters for gaps that are too big, and too small) How does gap size compare to ATR? (same) Have the previous x gaps filled? (look at both the direction of the gap, and against) How does gap direction compare to the trend direction? (look at a few timeframes) Where is the gap positioned compared to the previous day's value area? (ie, is there liquidity close by?) Where is the gap located compared to yesterday's High and Low? (inside/outside) What day of the week is it? (yes, there's a bias) How volatile has the market been? Is the gap near S/R? (this is one of the hardest to automate, so sometimes you end up cutting corners) This list is by no means complete, and I'd encourage someone who wants to delve into this look into these suggestions along with any other ideas they may have. I simply got a decent amount of historical data (think a couple years), and did some testing for each of my potential biases in Mathematica (Excel also works well for this) with a portion of the data. Once I had a good idea of a potential bias, I tested it on out of sample data. When combined, these biases give you a much better idea of the statistical edge you may have by trading any given gap. I programmed the strategy to enter anywhere from 9:00 to 9:45 on a technical trigger (for brownsfan's case, he looked at hammers; you may prefer some type of indicator or other method). Exits are enabled within a certain % of the gap fill, and exit on a similar technical trigger (so they may go past the gap). Hope this gives budding statisticians some ideas. In addition to biases, stop strategy is very important (and could be a bias in itself.. if price goes x% against, what's the chance it'll go back and fill?). Something mine does not do is the "bullets" approach, and there could be some validity in that. Hope I didn't barge in on your candlestick discussion, browns

From someone with a less than 50% accuracy, I mostly agree with what you're saying. However, I do disagree about scale outs. If you know much about Blackjack card counting, you know that your win rate is still under 50%; however, you simply increase your bet when you have the statistical advantage. This is where concepts such as the Kelly criterion come from. This applies directly to trading: when your edge is greatest, trade the biggest size. Most simply, this is your entry: elsewhere, your edge is 0 or slightly negative. When you enter (with a statistical edge, of course), you've calculated that you have a positive edge, so you put on size. The true idea behind scaling out is to manage your position with respect to your current edge. This assumes an important thing: you can roughly calculate your edge. For myself, I don't have the exact numbers; some do (Hlm probably has a very good idea of his actual edge). However, let's enter a hypothetical long that goes well. Eventually, we approach established resistance. Couldn't you argue that holding a long into resistance has a lower edge than, say, holding a long that just bounced off support? Or, what if, during your long, price fails to make a higher high, and makes a lower low? That's the first sign of a trend reversal. Your edge is less.

Excellent points, all. There is a huge difference between trading for hobby, and having people rely on your trading abilities. If trading is something you want to master (which requires more hours than you imagine, I promise), first stabilize your income: get a real job. Trading will always be here. Next, put the hours in. Success can be found many different ways; don't let anyone tell you differently. However, there is no golden ticket. All methodologies take time and commitment. Make a serious plan, and develop the psychology to stick to it. Every trade should be well defined: which direction you enter, where you enter, initial stop loss / risk management, and exit strategy. Each of these will take serious and deep thought. I'm one of the younger full-time traders here. To give you an idea of the time it takes, I studied markets and technical analysis casually for about 2 years, paper traded for 3 years, had a plan, and still managed to blow my first account. I learned more in the latter than any of the former. Some can do it faster, some never "get it". I've never met a successful trader that was in your situation, where immediate trading success is do-or-die. Every single one was not depending on trading profits to live. Some advice I wish I knew originally: If it were that easy, everyone would do it. There is no magic bullet; no flashy course can beat screen time. (The information available free in this forum is more than sufficient to achieve profitability.) Forget indicators, focus on learning price action, support and resistance, and Auction Market Theory. (The latter has several faces, including Market Profile and Wyckoff.)

Also look into NinjaTrader. It's a wonderful platform, and is very inexpensive. Data is usually free, and NinjaTrader can run off ZenFire data, with is simply amazing. I use it, and have never had serious problems with the charting, order execution, or data. Many brokers offer free Ninja simulations, and commission is extremely competitive on most. AMP Futures as well as Mirius offer the free demo, among others.

Not only will most decent players catch on quickly (or infer that you might make such a move), the move itself rarely maximizes estimated value. Let's look at three possible situations: What if your opponent has a weak hand? Your check then small raise made it very cheap for him to stay in and hit something that could beat you. A loose aggressive player will call those all day, and constantly give you "bad beats". When you raise all in, they will only call if they hit something. Even if they know you're bluffing, if they have air, they can't call. They're hardly committed, and can pull out easily. What if your opponent has a mediocre hand? Your check, small raise again makes it cheap to stay in. The mid pair can cheaply turn into trips, the double draw can cheaply draw. Then, your all in makes it easy again. If they missed or didn't improve, they likely won't call. Your absolute best case if a mediocre hand calling, thinking you're bluffing. If they did hit, however, you're usually beat. Finally, what if you're against a strong hand (either one that beats you or not)? By giving cheap cards and the lead, you're letting them take control of the aggression, putting you into a possible "all in call" situation (in which case: how good really is your hand?). In poker and trading, you want to maximize EV. With the worst hand, you want a premature fold. With the best, you want as much from others as possible. Sure, sometimes playing tricky is necessary, but this move is quite well known and probably doesn't maximize the outcome you want.

I've heard good things about Velocity Futures, which provides X-Trader for free under one of their quite reasonable commission structure plans.

I have a good friend who works at BBY and has an employee stock purchase program. Every 6 months, he gets a good amount of discounted shares, and he always asks, "Should I hold it, or sell right away?" (this isn't money specifically allotted to equity investing, so he is risk averse). Since the entry is unavoidable, my main goal is to see if a long is a good trade, and how risk can be managed. Here's the majority of my analysis of BBY. Of course, I'm not making any recommendations to you here, but the thought process may help some. My analysis takes a "zoom in" approach for the issue, applicable sectors, and larger market. Let's start with BBY itself. Here's an annotated chart showing about 16 months. There's a few things we can pick up from here before going deeper. First, the stock recently gaped up, and has yet to fill the gap. This is traditionally a sign of strength, as bears are not pressing down enough to get it into the "air" (highlighted). However, in general, if/when price enters the highlighted zone, there are few people to protect positions, and the gap will generally fill. In this case, since there wasn't much value before the gap, the move would most likely test down to the $31 area. Additionally, look at the recent price formation. Starting in December to mid March, price congested in the $26-$31 area. After a quick shakeout (on slightly higher volume than usual), price traversed the value area and broke out. Onward. Next we will look at $RLX, the S&P Retail Index. BBY is clearly stronger than $RLX, which is still in it's bottom consolidation range. It's right at the upper end at R, which does not help the long side. However, there is also a fairly large low volume zone, highlighted, above. Few people will likely be defending positions inside this. On the flip side, if one were to short this, a stop right above the range would be practical, at around $305. And a quick look at XLY, the Consumer Discretionary SPDR ETF. This one is a bit broader than $RLX, and is lagging both BBY and $RLX. It's currently at the midpoint of the range, which may provide R. If it is able to get above this value area, there's some "air" above. Finally, the NYSE composite index. It's lagging the most, in a definite downtrend, and made a major lower low when the rest double bottomed. Price is also right at potential R. So, the composite index is quite bearish, Consumer Discretionary has double bottomed, but has some potential R to deal with. S&P Retail is doing better, at the top of it's congestion range with a recent higher low. BBY is leading all of these, well out of its congestion and peaking into old value. While BBY looks fine, we also have to consider the sectors and market it is in. All things considered, I'd prefer to have decently tight stops in BBY. Due to S below, the gap, and low volume area all the way down to $31's, right around $36 would be the best logical stop for a swing trade. Looking up, we then have ~$41.5 then ~$43.5 to deal with. I certainly wouldn't initiate a new long here, but wouldn't be against holding a position. If the sectors and general market find R where they are, BBY will likely return to test old value. If they can break out, BBY will likely traverse the value area from last year. I welcome any thoughts, comments, additions, or other views.

Thirding, I like it as well.

Hey guys. Db, I got your email, and there's no need to worry about anything. Thanks for the thought, and apologies for not saying anything here. I've been extremely busy as of late, and needed to take a break from chat. I'll try to drop into chat on Monday and say hi. My schedule should be freeing up soon, so you'll see more of me . Hope all of you are doing well and have been trading well in the volatility. If anyone needs anything from me, PM's probably the best option.

Excellent. Thank you for all your work.

That certainly depends on how you trade, and how you exit. With the set profit targets you use, this may be the best. However, from my actual trades, scaling out (as well as scale ins on another entry signal) is significantly more profitable and provides a much smoother equity curve. The latter is quite interesting, as lower volatility in your P/L curve can possibly enable you to use less margin per trade (as long as you fully understand your risks and methodology). That said, there is no "right" way to do it, as you well know.

This is NihabaAshi's site. He trades using volatility and candle stick analysis. The "service" you're talking about is the setups he sells. I've never seen them or used them, but from my understanding, they're very well detailed and defined. In addition to the setups he sells, he runs a free chat room for anyone on IRC, where he posts live trades (and has some additional rooms for customer's). I've never bought anything of his, but I've seen him around, and he seems like an honest and stand-up guy who has a good understanding of market action and supply/demand. I'm sure his setups would be beneficial to someone that lacks the motivation or understanding to create their own. If he sees this thread, he might be able to add his two cents.

The idea is good, but you have to realize that YM, NQ, ES, etc are all highly correlated due to the underlying. Sure, one may give a setup while the others don't, but if your trading is that fragile, you might want to reexamine what you're doing. I'm not saying you can't profit from taking setups on correlated instruments, but it's not like it's a completely different markets. If you're looking for different markets, you can either zoom in and look at stocks intraday, or can trade other future products, such as Bonds, Currencies (the 6E is pretty liquid), Commodities, etc. In fact, if you end up with an extremely mechanized system that doesn't give setups very often, this is probably the eventual way to go.

Thanks for your hard work, we all appreciate it

Hmm, I'm not currently on my trading computer or normal internet connection, but I still seem to get stuck at the "Initialization" phase. Anyone else?

I guess we can use here for discussion when chat's down. I don't feel like dealing with it anymore, so we'll just let Soul get it fixed. Looking on short side as well.

Here too. It was working fine until right after US open.

Yeah, I'm sure I understand your concept (of intensity). However, I was simply asking what kind of interval could capture this stuff. For example, I trade on NinjaTrader with ZenFire for data, which gives very good live tick data. It seems as though this "retail" feed would work just fine, as I get the actual ticks. From there, it would be rather trivial to write a Ninja strategy that uses the tick data to gauge intensity my measuring how fast the ticks are coming in against a fast clock (such as a 100ms timer). Am I missing something?

So what kind of chart would show this kind of action? A 1s chart? A 100ms chart? 10ms? Because, while TS doesn't support these types of intervals, feeds like Zenfire might come close enough.