Stock and Futures Magazine has an excellent webinar on the Oops Trade, which looks for gaps that reverse.
Sources
- Webinar : Technical Strategy: Oops! Trades – Presented by Michael J. Carr, CMT – link
(must register a free account)
Setup
- For shorts : open above the High 1 day ago
- Works well on stock index futures, commodity futures, and volatile stocks
- Works particularly well on the Russell 2000 futures
Trigger
- Cross below yesterday’s high
- Cross above yesterday’s close
Exits
- First profitable open – holding overnight consistently works best
- However, exit strategy effectiveness Varies by market according to Carr
- Does not work well on intraday time frame
- SP is about a 3 day hold on average
- SP futures used a 7 point stop
Results
- 78.4% winners on the SP futures since 2000
- 74.2% winners on a basket of futures contracts
HistorySquared Notes
Some other ideas :
- Enhancing the strategy with additional overbought and oversold daily time frame filters combined with larger gaps can make this strategy an effective day trading strategy as well
- Implied Volatility will likely be high in the options markets on these gaps, so a credit spread may benefit from a volatility collapse
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