Gap & Go with Biotech Stocks: A Quantitative Study
Everyone wants a trading strategy that allows you to make 1 trade per day but still beat the market. Here are I explore how you could make one.
The Strategy: Gap & Go for Biotech Stocks
There is no point to reinvent the wheel so I took a highly popularized Gap & Go strategy. The “Gap & Go” is looking for stocks gap up from the previous day's close price with the goal to follow an uptrend. I’m using biotech stocks as they tend to have higher volatility compared to other industries.
There is a lot of information on the web about the idea and the thesis behind it. Detailed explanation of the enter and exit conditions below.
Screening Criteria
Enter Criteria (when to open a position)
Exit Criteria(when to close a position)
Other Conditions
The Results
+58% gain over one year
Profit $5,801.4 | Wins 48 | Losses 49
Looks pretty decent, but could probably be improved by looking at overall market conditions like $SPY behavior or news. Let me know what you think.
Disclaimer: all the calculations made with BreakingEquity backtesting engine. NOT investment/trading advice.
The Strategy: Gap & Go for Biotech Stocks
There is no point to reinvent the wheel so I took a highly popularized Gap & Go strategy. The “Gap & Go” is looking for stocks gap up from the previous day's close price with the goal to follow an uptrend. I’m using biotech stocks as they tend to have higher volatility compared to other industries.
There is a lot of information on the web about the idea and the thesis behind it. Detailed explanation of the enter and exit conditions below.
Screening Criteria
- Biotech Equities that belong to "iShares Biotechnology ETF"
IBB
- Up in the morning 3% or more
- Are above pre-market high and yesterday’s high
Enter Criteria (when to open a position)
- Stock price is above EMA 9
- Stock is going up and stays above EMA 9
Exit Criteria(when to close a position)
- Price crosses below EMA 9 and stays there for 3 bars
- End of the same day
- Trailing stop loss of 1.0%
Other Conditions
- $10,000 day trading capital
- Do not trade early close days
- If no equities meet the screening or entry criteria, do not trade
The Results
+58% gain over one year
Profit $5,801.4 | Wins 48 | Losses 49
Looks pretty decent, but could probably be improved by looking at overall market conditions like $SPY behavior or news. Let me know what you think.
Disclaimer: all the calculations made with BreakingEquity backtesting engine. NOT investment/trading advice.