A Pine Script tool that analyzes gap trading behavior by tracking gap up and down days, measuring price movements and potential trading opportunities in equities and indices.
Explore complementary indicator rolesHow it works
The Pine Script monitors daily price gaps by calculating the percentage difference between previous close and current open prices. It tracks and categorizes gap events as either gap up or gap down based on a user-defined threshold percentage.
For each gap event, the script records critical statistics including the number of gap up and gap down days, how many of those days closed against the initial gap direction, and the total points gained or lost during these gap events.
Why it may be useful
Gap analysis provides traders with insights into market psychology and potential short-term price reversals. By understanding how prices behave after significant gaps, traders can develop more nuanced trading strategies that capitalize on market inefficiencies.
This tool helps traders identify potential mean reversion opportunities and assess the reliability of gap movements across different market conditions. It transforms raw price data into actionable intelligence about market dynamics and gap trading behavior.
When to explore it
This signal works best in markets with consistent daily price gaps, such as stocks, indices, and futures contracts. Traders should apply it during periods of high market volatility when gap movements are more pronounced and potentially more predictable.
The tool is particularly useful for developing mean reversion strategies, understanding market sentiment, and creating systematic approaches to gap trading. Traders should combine these insights with other technical and fundamental analysis for more comprehensive trading decisions.
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What we’ve verified
Access, alerts and repainting behaviour have not been independently verified for this indicator. Check the creator’s current publication and settings.
General descriptions and classifications are recovered research. Verified details above identify the specific checks we have completed. Check the creator’s current publication for later changes.
