Hi Maji. Thanks for your post but I am afraid this system has nothing to do with gaps, it is a counter trend system. You probably read only page 3.

In the “Volatility breakout system” you calculate previous day range and your buy signal is at 70% of that range added to the open and your sell is at 70% subtracted from the open.

I like this strategy and it has worked for many people. But do you know what would be cool? If you could predict a break out before it happens, when the market has very low volatility. (I will give more ideas on this if more people are interested and participate).

This is what Super combo is trying to do. First of all it is buying breakouts but it also knows that there is a great likelihood that the initial break might fail.

To be more specific let us define a small range bar (SRB): compare the absolute value of the open-close of yesterday’s bar to the average of the absolute values of the past 10 days open-close ranges. If the bars open-close range is less than 85% of the 10-day average open-close range then it is considered an SRB.

An “Easier-buy day” is when the close is smaller or equal to yesterday’s close.
An “Easier-sell day” is when the close is bigger than yesterday’s close.

So when you have an SRB and Easier BD you buy at the open plus 30% of the 10- day average range (not true ranges. You sell at the open minus 60% of the 10-day average range.

When you have an SRB and Easier SD you sell at open minus 30% of 10-day average open-close range. You buy at open plus 60% of the10-day average range.

Protective stops at 25% of the average range at entry point.

This system was tested at Tradestation in 5 min bars for a period of 16 years and gave a net profit of $ 188913. Full report is at the pdf file.

If anybody liked the “Volatility break out system” please check this also.

Thanks

Mc Duck