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On this S&P 500 sample, a large majority of strict gaps eventually trade back through the prior session's extreme within a couple of months. That is the empirical content of gaps get filled. The companion fade rule, though, loses far more often than it wins: stops fire constantly, many fills arrive only after the time stop, and the payoff is skewed. A positive mean return can hide a strategy you would not want to sit through.
H₁ and low L₁,
a gap up is a day whose low L₂ > H₁; a gap down is H₂ < L₁.
We require the gap’s absolute size to exceed 0.5%
of the midpoint between the two sessions’ touching prices to drop micro-gaps.H₁;
for a down-gap, when a future daily high reaches L₁. Only full daily bars after the gap day.0.5× the gap size against the position;
exit at 5 calendar trading days if neither stop nor fill level hits.Share of gaps that touched the gap edge within N trading days (exclusive of the gap day).
| Horizon | Fill rate |
|---|---|
| 1 trading day | 16.7% |
| 5 trading days | 43.7% |
| 20 trading days | 65.4% |
| 60 trading days | 78.6% |
Win rate 33.7% · mean return per trade 0.465% (simple, not compounded). Exit mix: {"stop": 24531, "target_fill": 11717, "time_stop": 2689}
Generated by gapfill present · Run sp500_10y_default ·
Strategies registered: ["gap_fill", "naive_momentum_stub"]