Gap Fade Stats for July

Aug 6, 2008: 10:51 PM CST

It’s time to see how many gaps were formed and filled through the month of July!  July recorded the best performance so far for the ‘gap fill’ strategy – let’s look at the numbers.

For these studies, I use the DIA (Dow Jones ETF) and consider a ‘gap’ as being any opening price that is at least 20 cents (20 Dow Points) different than its closing price.  A gap fill is signaled once price does gap and then trades back to at least equal to the prior day’s close.

“Fading a Gap” means shorting a gap-up and buying a gap down, usually as soon as it happens.

For the month of July 2008, 15 out of 21 trading days opened with a gap of at least 20 cents (that’s 71% of days opened with some sort of gap!).

Of these 15 gap opening days, 12 gaps filled, meaning 80% of all gaps in July were filled!

Teasing the numbers a little, we find the following:

8 of 10 (80%) of gap ups were filled.
4 of 5 (80%) of gap downs were filled.

What if we increase our definition of a gap to mean at least $0.50 change (or 50 Dow Points) from prior close to the morning’s open:

8 of 21 days (38%) showed a morning gap of at least 50 cents.

6 of these 8 days’ gaps were filled, for a ‘gap fill’ percentage of 75%.

2 of 3 (66%) of gap ups were filled.
4 of 5 (80%0 of gap downs were filled.

Let’s define a “gap” as being greater than $1.00.

There were 4 trading days that showed an overnight gap greater than $1.00, and 3 of these gaps filled (75%).

These are fascinating statistics for gap-fill traders and for all market participants in general.  For gap-faders, July was about ‘as good as it gets!’

For an individual month’s performance, check out the following monthly posts from Afraid to Trade:

January Gap Fade Statistics
February Gap Fade Statistics
March Gap Fade Statistics
April Gap Fade Statistics
May Gap Fade Statistics
June Gap Fade Statistics

4 Comments

4 Responses to “Gap Fade Stats for July”

  1. robin Says:

    Corey,
    Awesome stats!! Thanks for all the hard work–great blog. For the 1st group of stats (20 dow points), do you have the stats for your stops? What was max heat or average heat to keep you in the trade?

  2. bzbtrader Says:

    Corey,
    Great post, and as a inverterate gap fader greatly I appreciate your on-going performance satistics. A useful risk management reality check for us short timers.

  3. Gap Fade Stats for September « David's Blog Says:

    […] Gap Fade Statistics April Gap Fade Statistics May Gap Fade Statistics June Gap Fade Statistics July Gap Fade Statistics August Gap Fade […]

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