What I'm about to share with you is from many years of research, number crunching, backtesting, and optimization.
I would really like an EA for this because I'm not always home to take the trade.
This trade setup alone is awesome. And it's very easy to find and execute.
Here it is:
About 60-65% of the time (about 30-35 weeks out of the year), when the Forex market opens up at 5 pm EST, it presents tradeable gaps.
*The total of all forex gaps created has filled 82% of the time.
*My own experience, trading, and research has shown that probability to be as high as 96% in some years, following my parameters.
Fact: You'll normally see around 30-35 weeks out of the year that present tradeable gaps.
Here's how I trade them:
1. Look for the currency cross that has created the largest gap. (Most of the time, these are exotic crosses...but sometimes they're major crosses as well.)
2. Once you find the gap, immediately fade it. (For example, if the market gaps up, go short; and vice versa.)
3. Your target if the market gaps up is the gap fill (Friday's close) minus the spread, minus 1 pip.
4. Your target if the market gaps down is the gap fill, minus the spread, minus 1.
*These are the targets that I've found to work the best since some gaps will go within one or 2 pips of filling, and then turn against you.
5. Your stop should ALWAYS be the size of the gap x 3.5.
e.g.-if Fridays close was 1.5000 and Sunday's open is 1.4950, the gap size would be 50 pips. So, your stop on this trade would be 175 pips from your entry.
6. That's it. Next Sunday, find the biggest gap, enter the trade, set your SL and target, and go about your day. Remember to use proper risk management though, as nothing is ever "guaranteed". I would reccommend a 1 or 2% risk per trade until you get comfortable with the setup. I have risked up to 30% per trade with small experimental accounts and have doubled, and trippled them in a very short time.
I believe you can expect a gap to fill at around a 90% accuracy rate. So, expect about 1 loser out of every 10 trades. Even a 3.5:1 risk to reward ratio proves to be profitable over the long run in this scenario. I had one run of gap trades fill for 32 times in a row. You only need to catch one of these big runs to build up a nice sized account due to compounded gains.
Does anyone have the ability to design an EA that:
Finds the biggest gap (gap must be at least 30 pips), initiates the trade, and places stop and target as explained above.
Please advise! Any help is very much appreciated.
Some gap data
Here's some gap data that I found from a while back.
Heat lists the % of the size of the gap that the trade went against you before it filled. For example, if it was a 30 pip gap, and the heat is 100%, then you would've seen the trade go 30 pips against you, before it filled.
Notice that the most heat that we took on a trade was 341%, precisely why our stops are placed at 350%, to keep you in the trade.
I noticed that if a trade goes against you more than 350%, it generally rips your head off (goes against you even more, sometimes hundreds of pips), or it just doesn't fill.
Hope it helps.
Results on forward testing...?
I'd like to hear how this is working for you.
Please post your results on any forward testing of this system if you wish.
All the best!
What is the reason for using only a gap of 30 or more?
Which program open this XLSX file format?
Not MS Excel?
the file is a 2007 excel file. Please see this link for further help opening:
How do I convert xlsx file to xls format..need to open a document urgently? - Yahoo! Answers
30 pips or more rule
You should make sure the gap size is around 30 pips to ensure you get enough profit on the trade.
For example: if you have a 20 pip gap in GBP/JPY, which usually carries a 9 pip spread, your profit potential would be only one pip. (20 pip original gap, minus 9 pip spread, minus 1, minus the spread again of 9 pips when calculating your target, (see rule)...
you would have 1 pip profit. (20-9-1-9=1)
You see why now?
Hope this helps.
You have to use MS 2007 to open the file or if you have older version sof MS office you have to use MS file conveter.
Thank you simple.
Or you could ditch MS Office altogether and just use Open Office, which can load/save any file from any version of MS Office and do everything that Office can. Here's the best bit, it's free.
Gettting back to the original topic of this thread...
I want to make several observations of a technical nature. By nature, that is what most interests me but I am a trader as well and have some experience with opening gaps.
Your description of the manual system makes it seem like a very easy system to implement. Actually it is very difficult to do and many coders would probably avoid taking on this task due to the complexity of the challenge involve.
Specifically I am referring to rule 1 which states "1. Look for the currency cross that has created the largest gap. (Most of the time, these are exotic crosses...but sometimes they're major crosses as well.)". EAs can easily be written to run on any currency pair for any time frame, but to write one that scans multiple currency pairs and triggers a trade for the optimum one is very difficult. Even if it was coded and working properly, it is impossible to backtest with MT4 Strategy Tester. I won't go into all the technical jargon to explain why, but simply put strategy tester can only trade the currency pair that it is attached to.
I hope you take my observations constructively and rethink how this going to be automated.