Measuring Weekend Gap Closure Rates and Adverse Excursions
Summary
This indicator measures weekend price gaps for a selected instrument and timeframe to assess whether fading a gap may be viable. It divides observations into recent gaps, the last twelve months, and the full available history. For each period, it reports gap counts and closure rates, average gap size, and average maximum favorable and adverse excursions. It also displays favorable-excursion thresholds reached by specified proportions of gaps, plus adverse-excursion thresholds among gaps that eventually closed.
The intended use is to estimate take-profit distances, understand how much adverse movement a gap-fade trade has historically endured, and compare instruments before choosing candidates. Users can set a minimum gap size and cap the historical bars scanned. The page gives examples of interpreting percentile readings, but provides no actual instrument results or independent validation. Historical distributions cannot guarantee future gap behavior, and the advice to place stops around percentile boundaries does not account for changing regimes, execution costs, or gaps that fail to close.
Key ideas
- The analyzer compares weekend gap behavior across recent, yearly, and full-history samples.
- It reports closure rates alongside maximum favorable and adverse excursions.
- Percentile excursion readings can inform profit targets and estimates of historical trade heat.
- A minimum gap threshold and history limit control which observations are analyzed.
- Historical gap statistics do not ensure future closures or protect against outlier losses.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.