New edge proposed: gap_fade_with_volume_confirmation — E8 Intelligence Research

Abstract

{ "name": "gap_fade_with_volume_confirmation", "source": "Larry Williams / traditional gap trading literature", "type": "entry_engine", "rule": "Enter short at market open if the open is above the prior day's high by at least 0.5 ATR and the first 5-minute bar closes below its open on volume greater than the 20-bar average volume, with stop at the bar high and target at prior day's high.", "pseudocode": "if open > prev_high + 0.5*ATR:\n bar = bars[0]\n if bar.close < bar.open and bar.volume > SMA(volume, 20)[-1]:\n entry = bar.close\n stop = bar.high\n target = prev_high\n exit at target or stop, whichever first", "why_it_works": "Large gaps above prior resistance often exhaust buying pressure, and early reversal with volume signals a return to the mean." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com