Emini and the Price Gap Theory

The speaker talks about a gap in the emini futures and talks through the definition of a gap and discusses some of the myths of gaps.  He discusses the difference between gaps and lapses.  The speaker defines a true gap as a price opening which is above or below the previous days high or low, it leaves a hole in the chart.  A lapse, on the other hand, opens higher than the previous days close but not above the previous days high or low.

A gap adds more risk to a traders profile and it is conventional wisdom that a gap or a lapse get filled within a short amount of time. 

The speaker has conducted research on gaps and concluded that buying gap downs and selling gap ups have no correlation to consistent profits.  The same conclusion applies to lapses.  Research was then performed on gap size; he conducted a study on trading smaller gaps and larger gaps.  Both studies came back with negative results.  At the end of the day, gaps are not as easy as they sound.