Unfilled Gap Trading? Strategies — (Gap Up / Gap Down) | (Backtest And Rules)
An unfilled gap trading strategy happens when all the price action today is either lower than yesterday’s low (gap down) or higher than yesterday’s high (gap up). They are also profitable if we base our buy signals on additional criteria. We do many backtests to measure profitability, and we give you some ideas on how you can take advantage of them. We only backtest the S&P 500.
Our strategy is as follows (using SPY 1993–2021):
Yesterday was an unfilled gap down day.
Today is an inside day.
If 1 and 2 are true, we enter at the close.
We exit after 5 days.
This pattern is very rare and has only happened 25 times in the S&P 500 since 1993. By using a time exit we get the following results (Shown in the below chart)
You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/unfilled-gap/