My Beliefs

The opening gap in the S&P futures is the single most significant daily event in the global equity markets.  It is, therefore, the most important trade of the day.

Understanding the historical probabilities of any given gap pattern provides me an "edge" versus other market participants for not just day trading, but for timing my entries for swing and long term investments.

Profit expectancy: (average profit per winner * probability of winning) - (average loss per loser * probability of losing) is far more important than just the probability of profits.

Recent price action and "where" the gap opens relative to recent support and resistance (i.e. the "zone") is as important as the "size" of the gap for determining the probability of it filling.

"One size does not fit all" when it comes to stops. Stops can and should be adjusted for not only the size of gap, but where it is opening relative to recent price action and support and resistance (i.e. "zone.")

Targeting the prior day close (i.e. gap fill) for all gaps is sub-optimal. Gaps into some zones have a high probability of not only filling that day, but continuing through the prior day close and beyond. Other gaps have a lower probability of filling that day and a trader should target a price between the gap open and prior day close. The zone is the key.

Some zones are sensitive to the price range (high-to-low) of the prior days. Some perform best after large trading range days and visa versa.

The calendar matters (i.e. month, day of month and day of the week). Some zones should not be traded on a Monday. Other should not be traded on a Friday. Others are exceedingly poor performers the last few days of a month or the beginning. And still others fare poorly in specific months of the year (i.e. May, November, etc.) Know your zone and its seasonality.

The name of the game is to focus on long term results and minimize variables through consistent execution.