Profits from gap fill or gap continuation patterns
| Strategy Type | Gap Trading / Opening Strategy |
| Market Outlook | Profits from gap fill or gap continuation patterns |
| Risk Profile | Moderate - defined risk with quick resolution |
| Reward Profile | Quick profits (20-100+ points) within hours to days |
| Time Horizon | Intraday to 2-3 days typically |
| Iv Environment | N/A - Futures/Index based |
| Breakeven | Win rate × Avg win > Loss rate × Avg loss |
| Primary Instruments | FTSE 100 Futures, UK100 CFD, FTSE 250 Futures |
| Mas Compliance | MAS regulated brokers required for futures/CFD trading |
| Trading Hours | Gap analysis at London open (4 PM SGT); trading during London session |
| Contract Size | FTSE 100 Futures: £10 per point; Mini: £2 per point |
| Settlement | Cash settled; overnight financing for CFDs |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Standard margin for day/swing positions |
| Cdp Account | Not required for futures/CFD; custody with broker |
| Singapore Relevance | Gap trading ideal for Singapore - analyze gaps at 4 PM SGT (London open), trade during evening hours, clear entry/exit rules |
A gap occurs when price opens significantly different from the previous close, leaving an empty area on the chart. Gap up: Opens higher. Gap down: Opens lower. Caused by overnight news, sentiment shifts, or order imbalances.
No, not all gaps fill. Statistics: 60-70% of small-medium gaps fill same day. Large gaps (80+ points) only 40-50% fill. Breakaway gaps often don't fill for extended periods. Gap type matters.
Trading expectation that price will return to previous close. Gap up = Sell/short expecting drop. Gap down = Buy/long expecting rise. Target is the 'fill' level (previous close).
Trading WITH gap direction after gap holds for 30 minutes. Gap up that doesn't fill = Buy expecting continuation higher. Requires confirmation that gap is holding before entry.
For Singapore: London open at 4 PM SGT. This is when FTSE gaps appear. Observe first 30 minutes, then trade. Gaps are most active in first 1-4 hours of London session.
Common: Small, random, usually fills. Breakaway: Breaks out of range, starts trend, rarely fills. Runaway: Middle of trend, shows acceleration. Exhaustion: End of trend, final push, usually fills.
Gap INTO support/resistance: High fill probability (level should hold). Gap THROUGH support/resistance: Low fill probability (breakout). S/R interaction is key classification factor.
High volume + Continuation: Strong gap, trade continuation. High volume + Declining: Possible exhaustion, consider fill. Low volume: Weak gap, higher fill probability. Climax volume: Often exhaustion.
Exit if gap trade hasn't worked within specified time (usually 4-6 hours for fill trades). Gaps that will fill usually fill quickly. Time stop prevents capital lock-up in non-working trades.
Many gaps only partially fill (60-80%). Taking partial fill profit is acceptable. Better to lock partial profit than hold for full fill and have trade reverse. Consider partial exit targets.
Features: Gap size, direction, ADX, volume ratio, S/R interaction, day of week, news flag. Target: Fill probability or time to fill. Use regression or ML models. Validate with walk-forward testing.
Optimize parameters on historical in-sample data, test on subsequent out-of-sample data, roll forward. Example: Optimize on months 1-18, test on 19-24, roll forward. Prevents overfitting.
Allocate 10-20% of trading capital to gaps. Separate risk budget. Track performance separately. Gaps complement swing and momentum strategies. Different timeframe, non-conflicting.
Assess news significance objectively. Compare gap size to expected impact. Significant news + proportional gap = Continuation. Minor news or overreaction = Fade opportunity. Wait for initial reaction.
Track all trades in database. Analyze win rate by setup type. Walk-forward test parameters quarterly. Monitor performance trends. Adapt to changing market conditions. Test new filters systematically.
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