Trading Session Gap Fills with an ATR Trailing Stop
Summary
This strategy looks for a session gap that meets a configurable percentage threshold, then enters when price crosses the previous session's close and finishes the bar back on the original gap side. After a gap up, a bar that trades below the prior close but closes above it triggers a long; after a gap down, a move above that reference followed by a close below it triggers a short. Signals are excluded from the first and last session bars, and entries require a confirmed bar with no open position.
An ATR-based trailing stop begins a configurable distance from the average entry price and ratchets only in the favorable direction as closing prices move. The document describes the method as a way to trade gap fills and notes its session-based applicability, but provides no performance results or asset-specific testing. It also supplies no fixed profit target or time exit, so outcomes depend on the trailing stop, gap behavior, and execution assumptions. The gap threshold and ATR settings are parameters to evaluate rather than evidence of an edge.
Key ideas
- A gap is considered only when its size meets a user-set percentage threshold.
- A long entry follows a qualifying gap up when a bar crosses below the prior close and closes back above it.
- A short entry follows a qualifying gap down when a bar crosses above the prior close and closes back below it.
- The strategy excludes first and last session bars and requires a confirmed signal while flat.
- An ATR-based trailing stop ratchets favorably, but the document reports no test results or fixed profit target.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.