Handling Overnight Gaps in Tick-Based Technical Indicators

Summary

The document raises a practical issue in rolling indicators built from tick data across a market close. Ticks immediately before the prior close may have different statistical properties from ticks after the next open, yet a fixed lookback such as the previous hundred observations can span both sessions. The question is how to keep indicators meaningful when that happens.

One proposed method is to accumulate overnight open-to-prior-close gaps and shift subsequent bar prices by that amount, potentially estimating an adjustment that better matches ordinary intraday transitions. The question also considers interpolating artificial ticks between the prior close and new open. No answer evaluates these methods, supplies a formula for tick-level implementation, or presents evidence that one approach works. The central takeaway is that indicator continuity across sessions requires an explicit choice about whether to adjust for gaps, reset the lookback, or represent the overnight move; the suitable choice depends on the indicator and the market’s behavior.

Key ideas

• A rolling tick indicator can carry observations from the prior session into the next session.
• Overnight price gaps can make adjacent ticks across a close behave differently from intraday ticks.
• One suggested adjustment is to accumulate overnight gaps and shift later prices by the resulting amount.
• Interpolating artificial ticks is another possibility, but the document does not assess its validity.

Tags

# How to calculate technical indicator using tick data cross the night?


# How to calculate technical indicator using tick data cross the night?












The tick data shortly before the close in yesterday have different statistics and charasterices compared to the tick data shortly after the open in today. Then, how I calculate the indicators using the data in these two periods? For example, my some simple indicators use mean value of data in previous 100 ticks, so I have to combine with tick data in yesterday make up 100 ticks to calculate such indicators for the ticks after the open in today.

I find the https://www.elitetrader.com/et/threads/adjusting-intraday-indicators-for-overnight-gaps.229364/ and https://www.elitetrader.com/et/threads/overnight-gaps-in-intraday-indicators.73315/ have also discussed such issues, and one idea therein is:

"The most straightforward way is to maintain a running summation of overnight gaps (Open - Close[1]) and apply it to all four price values of every bar. You may want to collect some statistics intraday to determine if you should adjust the overnight gap to more closely mimick intraday close/open gaps. "

but I am not sure if it works. Maybe we can also use interpolation to artificially construct some tick data to connect the yesterday close and today open, the how to do?

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