Gap-Filling Strategy with Reversal and Continuation Modes

Summary

This strategy identifies session gaps by checking whether the opening price clears the previous bar’s high or low, with an additional condition that the gap remains open relative to the prior candle body. It sets a reference level from the prior candle’s open or close and uses that level as an exit. In its default mode, it fades an up gap with a short and a down gap with a long, seeking a gap fill. An invert option instead trades in the gap’s direction and uses the reference level as a stop.

The document describes gaps as potentially common, breakaway, runaway, or exhaustion patterns, and notes that volume can help assess their significance. It also provides controls for closing positions at a new session, a new gap, or upon reversal. The source and rules explain the mechanics, but the excerpt ends before fully describing the exit behavior, and it reports no measured results. The strategy depends on session boundaries and gap behavior, which may vary across instruments and market schedules; the available material does not establish profitability or account for execution costs.

Key ideas

• A gap is detected when a session open moves beyond the previous bar’s high or low and remains separated from the prior candle body.
• The default mode takes the opposite side of the gap and exits at a level associated with the previous candle.
• An inversion option follows the gap direction and changes the reference level from a target to a stop.
• Position closing can be configured around a new session, a new gap, or a reversal.
• The document provides strategy rules but no performance evidence or execution-cost analysis.

Tags

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