A Long Gap-Catching Strategy with a Percentage Stop

Summary

The document presents a long-only strategy derived from a gap-detection indicator. It uses a configurable lag to compare the close with a prior close and checks for a gap between the current high and the previous bar's low to trigger an entry. A corresponding gap condition can trigger an exit, and the example applies a percentage loss stop. The author reports backtest win rates and win-to-loss ratios for several stocks and an index on five-minute data, using different parameter values.

These figures are author-reported examples rather than independently verified evidence. The post gives little detail on date ranges, costs, slippage, instrument selection, or whether parameters were selected after testing. The implementation also sets its amplitude threshold to zero and does not describe a robust optimization or validation process. Results across a few instruments do not establish that the signal will generalize, especially after trading costs or in other market conditions.

Key ideas

• The strategy enters long positions when its lagged-close and gap conditions indicate a signal.
• It exits when an opposing gap condition appears and also uses a percentage loss stop.
• The author reports historical results for several instruments using five-minute data.
• The post omits key backtest details such as dates, transaction costs, and slippage.
• The examples do not establish that the strategy generalizes to other periods or instruments.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.