Gap Strategy (rev)
An initial gap trade at the open of the Dow Jones index is a straightforward yet effective strategy that capitalizes on price discrepancies resulting from market activity during non-trading hours. The concept revolves around the ‘gap’ that occurs when the market opens at a price significantly different from its previous day’s close. This disparity creates an exploitable opportunity for traders.
The process begins with analyzing the closing price of the Dow Jones index from the previous trading day. When the market reopens, if the opening price deviates substantially from the prior close, it creates a visible gap on the price chart. The essence of the strategy lies in identifying and acting upon this gap.
Our Gap Strategy, employing this approach, aims to capitalize on the momentum generated by the gap, taking a position in the direction that aligns with the gap’s direction. For instance, if the market opens higher than the previous close, traders might consider taking a short position, anticipating the price to move lower looking to fill the gap. Conversely, if the market opens lower, traders may take a long position, expecting the price to converge and fill the upward gap.
This strategy is characterized by its simplicity and speed, making it attractive to traders seeking quick opportunities at the market open.
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Breakdown
- 1.27 Profit Factor
- Simple and speedy. The Gap Strategy trades only once a day at the open.
- Risk management, stop losses, and capital compounding are included in the internal parameters.
- If there is no gap or the gap is too narrow a trade may not take place. *
0-1 Per Day *
S&P 500, Nasdaq, Dow Jones, and Russell 2000
USD
User-Driven
What is Gap Trading?
A gap occurs when the market price of a security jumps to another price level, either higher or lower, where little if any trading has taken place. A good example is an unforeseen comment from a senior Fed official regarding the direction of interest rates. Once the comment hits the newswires, markets may react immediately, with market makers pulling their bids and offers. This may cause a price gap from the last price at $25.20 to $26.50, for example.
Gaps are frequently seen in price charts of almost every security. In stocks, the most frequent and significant gap occurs between the daily close and open of the exchange. In FX markets, since they operate 24 hours a day, a gap may not be visible (possibly on a one-minute chart) but instead appears as a very long candlestick covering the gap in price. (FX markets may experience gaps over the weekend, between the Friday New York close and the Sunday Asia opening.)
Price gaps can bedevil traders, especially if they’re on the wrong side of the gap. The most attractive trading opportunity with gaps is to go long or short as the market moves to close, or fill, the gap. a reasonable gap trade strategy would be to sell the instrument that has opened higher than the close. The price opened at 26.50, a short position was opened in this example (sell short) in anticipation to close the gap...(the space between 25.20 and 26.50).
How it works
1) Download Strategy
After completing your purchase you'll create an account on Arch Public. From there you can download your Strategy and several other valuable resources.
2) Set up TradeStation
We've partnered with TradeStation and their award-winning platform. When you sign up using our link you'll receive 50% off fees, forever. Once your TradeStation account is up and running you will be able to install the Strategy.
3) User-Driven Automation
From within the TradeStation platform you'll be able to adjust your risk parameters and turn the automation on or off.
FAQs
Does Arch hold my money and place trades?
No, we do not have custody of any funds and do not place orders. All of that is handled through your selected brokerage. Right now, we only support TradeStation.
How long before I am up and running?
Really depends on you. The process is simple.
1) Purchase your selected strategy and download the files.
2) Set up your Tradestation account.
3) Install strategy on your Tradestation account.
4) Set your risk parameter and turn it on.
Will I be able to watch the strategy place orders in real-time?
Yes, when you set up your account you will see and know exactly when an order is placed, how its doing, and when it's closed. You'll be able to see during demo call as well.
Is it possible to wipe out my whole account in one trade?
Your max loss threshold is completely up to you. We recommend it to be in the range of between 2% and 10%. You would multiply your capital by the max loss threshold to find out how much you could lose in a day.
It is not possible to wipe out your whole account unless you radically change your settings well beyond what we recommend. Example: if you put your max loss threshold at 100% and had a loosing day then yes you could wipe out your account.
What PC Specs should I run?
We would recommend something like this:
Processor - Quad-core Intel®or AMD®processor at 3 GHz or faster
Memory: 12GB+
HDD: 7200 RPM with 1GB+ of free space
Video: 32-bit graphics support1 GB or more for multiple monitors
OS: Windows®10 64-bit
Internet Connection: Broadband Connection
10 Mbps or better (download)