Daily Open Gap Reversal Using Previous Candle Size

Summary

This strategy looks for mean reversion after a large previous candle and a gap at the next open. It describes a long signal when the new open gaps down and a short signal when it gaps up, conditional on the previous candle’s real body exceeding a chosen threshold. Positions use preset stop loss and take profit levels. The document describes the method as suitable for GBP and AUD daily charts, while suggesting that other markets and timeframes can be tested.

The evidence provided is a rules description and a sample configuration for BTC/USDT futures; it does not report performance results. The source logic and prose are not fully aligned: the listed trigger conditions appear to test the current candle’s body and direction, rather than explicitly comparing the current open with the previous close. The document also cautions that persistent trends can defeat reversal entries, trading costs can accumulate, and parameters require testing. Its optimization suggestions include higher timeframe trend filters, volatility based stops, additional filters, and position sizing.

Key ideas

• The strategy seeks reversals after a large candle followed by a gap at the next open.
• It describes buying a downward gap and selling an upward gap, subject to a candle size threshold.
• Stop loss and take profit levels are used to define trade exits.
• Trend continuation, trading costs, and parameter selection are cited as important risks.
• The text describes GBP and AUD daily charts as preferred markets but provides no performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.