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2016issue C0448

Constructing a gap-fill long as one entry and exit checklist

A historical gap-fill long is built as one procedure: an extreme opening-window screen, a post-open cup-base or consolidation-breakout, and a fixed-cent trailing-stop. The same checklist that fires the signal also decides when to stay flat.

  • A long after a large downward opening-window is considered only if price starts trending higher after the open, not at the gap print.
  • Candidates are assembled with unfilled-gap and extreme daily-percentage scans, then limited by price, prior-day range, and per-minute volume.
  • Confirmation is a move above a cup-base or a consolidation-breakout through a 50-cent band; choppy or low-volume charts stay flat.
  • The constructed intraday exit is an initial and trailing-stop of as much as 40 cents.
Entries in this reading3 entries
Current trackGap trading24 readingsBreakout system93 readingsRule-based entry292 readings

The constructed procedure

The archive workflow treats a gap-fill long as a sequence that is already complete before any order is allowed. Unfilled-gap and extreme daily-percentage scans assemble candidates first. Only then do the entry and exit rules run.

A gap-fill is a return of price into the prior session's traded range after an opening discontinuity. The opening-window is the overnight or pre-session gap that leaves a blank between yesterday's close and today's first prints.

Screen the opening-window

A gap larger than 10 percent is treated as an extreme that often trades back into the prior session's range. Unfilled-gap and extreme daily-percentage scans use that treatment to assemble candidates before the entry and exit rules run.

The breakout universe is limited to shares priced 20 to 70 dollars, a prior-day high-low range of at least one point, and volume of at least 15,000 shares per minute. Those gates run on the scanned names before a rule-based-entry can be considered.

Confirm after the open

After a large downward opening gap, the long is considered only if price starts trending higher after the open, not at the gap print itself. Visual long confirmation is a move above a small cup-base or a consolidation-breakout through a 50-cent consolidation band.

A cup-base is a small rounded pause that, once cleared, confirms the post-open uptrend for a long. A consolidation-breakout is a print through a tight sideways band used as the trigger rather than the gap itself. A rule-based-entry is a long that is allowed only after stated market-state, pattern, and liquidity conditions are all true.

When the system stays flat

Choppy or low-volume charts are excluded. Wide-range, clearly trending charts are the intended working sample. The abstention-filter is the rule that keeps the system flat on choppy or thinly traded charts.

Editorial reading: if the opening-window screen, the universe gates, or the post-open pattern fails, the procedure is finished and the system stays flat.

Exit with a fixed-cent trail

The constructed intraday exit uses an initial and trailing-stop of as much as 40 cents. A trailing-stop is a protective exit that follows favorable price by a stated maximum distance.

Editorial reading: stating the trail when the entry is defined keeps the exit inside the same procedure as the signal.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
15 of 20 in the Gap trading track
201649-55 pp.Next on Gap tradingGap-reversal entry and trailing-stop rulesA long is considered only when the open is at least 10 percent below the prior close and price then lifts a fixed amount above the session low during the first hour.
All readings on this track · 20 readings
  1. 1988Constructing short-horizon gap and trailing-stop rules
  2. 1996Constructing closed rules for spikes, time stops and gap failures
  3. 1999Opening-gap same-day fade rules
  4. 1999Evaluating same-session opening-gap rules
  5. 1999Constructing mechanical gap-fade entry and exit rules
  6. 2000Constructing opening-gap continuation entry and exit rules
  7. 2000Gap types as trade hypotheses
  8. 2003One-day fade-the-gap rules remain unfinished across market climates
  9. 2003Gap and pivot entry rules with stops written before the fill
  10. 2007Evaluating gap and lap opens against short-horizon baselines
  11. 2007Evaluating same-day gap rules across price, momentum, and weekday
  12. 2011Session gaps as a fade-or-follow drill
  13. 2015Testing gap continuation breakouts as one procedure
  14. 2015Downside exhaustion gaps as a ten-session fade procedure
  15. 2016Constructing a gap-fill long as one entry and exit checklist
  16. 2016Gap-reversal entry and trailing-stop rules
  17. 2016Constructing late entries from serial uptrend gaps
  18. 2017Premarket gap permission with cup breakouts and one tight trail
  19. 2018Inside-range gap breakout entry and stop rules
  20. 2020Closing-range breakout after a downside gap
By fieldEntry and exit rules327 readingsBy year2016134 readings
All 24 readings tagged Gap trading
Also on Gap trading5 readings
2020Closing-range breakout after a downside gap2015Testing gap continuation breakouts as one procedure2017Premarket gap permission with cup breakouts and one tight trail2018Inside-range gap breakout entry and stop rules1996Constructing closed rules for spikes, time stops and gap failures