Opening gap fades bounded by excursion and time stops

Same-direction entries did not separate excursion

An opening gap is a session open above the prior day's high or below the prior day's low. Gap trading is a single testable procedure that defines entry, target, reversal and abstention from that opening print.

Trading in the direction of an opening gap produced almost no separation between favorable and adverse excursion, including when movement was inspected one, two, or twelve days after entry. Raising the minimum gap filter from one point through larger thresholds up to fifty points left the favorable-excursion profile essentially unchanged from the one-point-gap case.

Same-direction gap entries showed adverse movement that was at least as common as favorable movement. Later tests reversed the rule and faded the opening gap instead. A gap fade is an entry taken opposite the opening gap rather than in the gap's direction.

Count adverse excursion only until the planned exit

Maximum favorable excursion is the largest move in the intended direction after entry. It is used to check whether a small target is reachable at all. Maximum adverse excursion is the largest move against a position before the planned exit. It is used to bound loss or exposure instead of scoring unused days after the trade is already closed.

For a point-target trade, only the adverse move before exit should be counted. Measuring maximum adverse excursion across the entire unused holding window inflates losses that never occur if the position is already closed.

Winning fades stayed inside a tighter adverse range

In fades of any opening gap that targeted twenty points, winning trades rarely exceeded one hundred points of adverse movement, while losing trades continued beyond one hundred twenty-five points. Most winning fades stayed inside fifty points of adverse movement, and many stayed inside twenty-five points. A fifty-point reverse stop in the original gap direction was proposed as the loss bound.

When entries faded gaps of fifty points or more, the smallest favorable excursion recorded was eight points. That eight-point figure was then used as the profit-taking threshold in the follow-up tally. An eight-point target fade of any opening gap still produced adverse excursions large enough that a cutoff beyond one hundred fifty points against the position was discussed as a practical bound.

A time stop at the end of the third day

Winning fades typically completed on the entry day or within two to three sessions. A time stop at the end of the third day was proposed for trades that had not already hit the fifty-point price stop. A time stop is a calendar cutoff that ends a still-open trade after a fixed number of sessions when the price stop has not been hit.