Exhaustion Gap
BearishReversalIntermediateThe last gap of a long rally, filled within days. The buyers are spent.
Verdict: SkipBitcoin 4H: 0 trades, won —, avg trade — vs random day — (too few trades to judge). Backtest
A long, steep rally. By now, almost everyone who wanted to buy is already in.
step 1/6
Trade rules
| Direction | Short (sell) |
|---|---|
| Entry | In an advance of at least 10% (7% on Bitcoin) from the lowest low of the last 30 candles, a gap up to a new high, then a candle CLOSES back below the high of the candle before the gap within 5 candles. |
| Cancelled if | No close back below the pre-gap high within 5 candles: the gap held, so there is no trade. |
| Target | 2x the spike, projected from the breakout |
3 common mistakes
- Shorting the gap itself: until it fills, it could be a runaway gap.
- Putting the stop at the gap instead of above the new high.
- Shorting a gap that only half fills: the close must get back below the pre-gap high.
Backtest
same rules every time · equal size · no fees · method| Market | Trades | Won | Avg trade | Random day |
|---|---|---|---|---|
| Bitcoin · 4H · 2017-2026 · too few trades to judge | 0 | — | — | — |
| US large caps (50) · 1D · 2016-2026 | 250 | 47% | −0.15% | −0.94% |
Verdict: SkipLost money on average on US large caps. Bitcoin had too few signals to judge.
pattern −39%random −235%