PROFIT FROM GAP TRADING. A simple, but effective strategy.

Transcription

1 TIPS. 06 SKYSCRAPER. Burj Khalifa, Dubai. The worlds tallest building on the scale of 828 metres high. PROFIT FROM GAP TRADING. A simple, but effective strategy.

2 TIPS. 06 PROFIT FROM GAP TRADING. by Philipp Kahler Philipp is the Senior Quant Analyst at Intalus. He was born in Austria and studied electrical engineering before joining a large German Bank. He developed fully automated trading strategies for their proprietary trading department. His book about how to design winning trading strategies has been among the top sellers in Germany for the last two years. At Intalus he is responsible for the in house training of institutional traders and the development of custom made algorithmic trading strategies. You may contact Philipp at philipp.kahler@

3 TIPS. 06 PROFIT FROM GAP TRADING A simple, but effective Strategy Ever wanted to test a simple gap strategy? Sometimes the simplest of strategies can reveal startling results. This example below from British Sky Broadcasting illustrates this nicely (see performance chart in the lower pane). Of particular importance is the equity curve. A steadily rising stream of profit. Here comes the Equilla code to do just this: if bartype=bartypedaily then begin // only runs on daily data if open of tomorrow > high then short next bar at market; // short if overnight up gap. Watch this video to see how you can create a gap trading strategy using Tradesignal. cover ("Gap closed") next bar at high limit; // cover if gap closed end; The strategy is designed to keep things simple. It is works best if run on daily data and it enters a short trade if there has been an up-gap overnight. (open tomorrow > high today). The trade is closed if the gap is closed.

4 TIPS. 06 As with most strategies this may be applied to a portfolio or watch list. Here I have a selection of stocks from the FTSE 100 to find good opportunities for trading the gaps. To do the same in reverse (that is go long, if we get a down gap) we just add again reversing the direction like so; if bartype=bartypedaily then begin // only runs on daily data if open of tomorrow > high then short next bar at market; // short if overnight gap up. cover ("Gap closed") next bar at high limit; // cover if gap closed if open of tomorrow < low then buy next bar at market; // long if overnight gap down. sell ("Gap closed") next bar at low limit; // sell if gap closed end;

5 TIPS. 06 If the gap is not closed during the day a second strategy can provide the emergency exit and closes the trade at the end of the day. This is the code I would use for my end of day exit; exitposition this bar on close; Take care, take profit, Philipp Kahler Senior Quantitativ Analyst at Intalus 2013 Intalus www. Distribution allowed under a Creative Commons Attribution-Noncommercial license: Tradesignal is a registered trademark of Tradesignal GmbH. Unauthorized use or misuse is specifically prohibited.

6 How to find the best performers out of hundreds of stocks in seconds. How to create your own equity basket. How to create and trade an optimal portfolio. How to identify and profit well from a short trade. How to use point & figure trend lines in candlestick charts. PROFIT FROM GAP TRADING. TIPS. 06 PROFIT FROM THESE TRADING TIPS AND VIDEOS TOO. TIPS. 01 SCAN FOR THE BEST. SCAN FOR THE BEST. How to find the best performers out of hundreds of stocks in seconds. TIPS. 02 SPEED UP YOUR DECISIONS. SPEED UP YOUR DECISIONS. How to creat your own equity basket. TIPS. 03 CONTROL YOUR RISK. AUTO-ADJUST POSITION SIZE. AUTO-ADJUST POSITION SIZE. How to create and trade an optimal portfolio. MORE KNOW-HOW AND VIDEOS HERE TIPS. 04 HIGHLY EFFICIENT SHORTING. HIGHLY EFFICIENT SHORTING. How to identify and profit well from a short trade. TIPS. 05 RULE-BASED TRENDLINES IMPROVE DISCIPLINE. RULE-BASED TRENDLINES. How to use point & figure trend lines in candlestick charts.

7 PROFIT FROM GAP TRADING. 06 Tradesignal is a registered trademark of Tradesignal GmbH. Unauthorized use or misuse is specifically prohibited. TR DING TIPS. FIND TRADING GAPS QUICKLY. Are you looking for an assistant who permanently watches the market for trading opportunities like gaps? Find out how you can trade more efficiently. Use Tradesignal to improve your returns. NOT ALREADY A TRADESIGNAL USER? CLICK HERE b FREE TRIAL AND ORDER YOUR FREE TRIAL TODAY.