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My name is Scott Andrews and I trade the opening gap. This site is a repository for my gap trading ideas and research.  Feel free to browse and contribute to the discussions.

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« Gaps & Volatility, Part 3 | Main | Gaps & Volatility, Part 1 »
Sunday
Oct122008

Gaps & Volatility, Part 2

Yesterday I showed the impact of gap fading the E-mini S&P 500 during various periods of volatility, 1/1/1998 - 10/1/2008, using only an end-of-day stop. Today I'll show the results of using a fixed 6 point stop for the same scenario:

As you'd expect, the win rate drops as the volatility increases since the 6 pt stop is proportionally smaller as the ranges expand.  Interestingly, all volatility bands were profitable using a 6 pt stop. The reduction in win rate is offset by an increase in the win/loss ratio.

Now, this of course begs the question, "what if I used a variable stop based upon the ATR?"  I'll consider that in tomorrow's blog post.

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