It’s easy to get lost in the sea of indicators and strategies out there, but one thing that is frequently overlooked these days is the simple gap. Often this gives us a great steer as to market direction from the open, especially if the market is at important support/resistance or in ‘overbought’/’oversold’ territory. The DAX seems to be particularly ripe for gap trading.

My code considers not just today’s gap (relative to yesterday’s close), but the previous three days’. It’s up to you to decide how likely it is that each gap will fill (I wish I could write some code that could assist here, but suspect this is beyond the current scope of PRT – ideas welcome), but I think it’s quite neat to have these levels preloaded on your chart as you prepare for the day ahead.

The code gives you the ability to change the trading hours, which I think is important, though I also believe that the markets seem to respect 8am London time (9am CET) as the ‘official’ open and 4.35pm London time (5.35pm CET) as the ‘official’ close on which gaps are evaluated so for instance if the market continues to drift lower in the evening session and then then opens at a similar level the following day, it will still tend to seek out the 4.35pm close from the previous day even though the charts will show there is no gap per se. As I am based in the UK, those users in other timezones will have to adapt the respective times in the code to their own timezone.

Why not just use DOpen, DHigh, DLow, DClose with custom trading hours you may ask? Because it occurred to me yesterday (I may be mistaken) that even when you play around with the trading hours, the DOpen/High/Low/Close values remain the same, i.e. they reflect the respective values over the entire 24-hour session, or maybe it’s because I didn’t tick the ‘Apply settings above to non-intraday timeframes’. Anyway I feel more confident using my manually coded versions…

Please feel free to suggest how to expand/improve the code.

DEFPARAM DrawOnLastBarOnly = False

// HOffset = 3
VOffset = (5*pointsize)

i = IntradayBarIndex

MarketOpenTime = 080000                        // Must be adapted to timeframe on chart
CashMarketCloseTime = 163500                   // Must be adapted to timeframe on chart
FuturesMarketCloseTime = 180000                // Must be adapted to custom trading hours on charts

IF Time[1] = MarketOpenTime THEN
b = i
BackgroundColor(64,224,208,100)
ENDIF

IF Time = CashMarketCloseTime THEN
c = i
BackgroundColor(64,224,208,100)
ENDIF

IF Time = FuturesMarketCloseTime THEN
d = i
ENDIF

IF d > b AND d > c THEN
YesterdaysOpen = Open[i+(d-c)+(c-b)+1]
YesterdaysHigh = HighofDaysRange[i+(d-c)+1]
YesterdaysLow = LowofDaysRange[i+(d-c)+1]
YesterdaysClose = Close[i+(d-c)+1]
OpenTwoDaysAgo = Open[i+d+(d-c)+(c-b)+2]
HighTwoDaysAgo = HighofDaysRange[i+d+(d-c)+2]
LowTwoDaysAgo = LowofDaysRange[i+d+(d-c)+2]
CloseTwoDaysAgo = Close[i+d+(d-c)+2]
OpenThreeDaysAgo = Open[i+(2*d)+(d-c)+(c-b)+3]
HighThreeDaysAgo = HighofDaysRange[i+(2*d)+(d-c)+3]
LowThreeDaysAgo = LowofDaysRange[i+(2*d)+(d-c)+3]
CloseThreeDaysAgo = Close[i+(2*d)+(d-c)+3]
// OpenFourDaysAgo = Open[i+(3*d)+(d-c)+(c-b)+4]
// HighFourDaysAgo = HighofDaysRange[i+(3*d)+(d-c)+4]
// LowFourDaysAgo = LowofDaysRange[i+(3*d)+(d-c)+4]
CloseFourDaysAgo = Close[i+(3*d)+(d-c)+4]
ENDIF

IF i = b THEN
// TodaysOpen = Open
// Stoploss = Open-(1*(YesterdaysLow-Open))
OpeningbarHigh = High
HighofDaysRange = High
OpeningbarLow = Low
LowofDaysRange = Low
ELSIF i >= (b+1) AND i > b THEN
HighofDaysRange = MAX(OpeningbarHigh,Highest[(i-b)+1](High))
LowofDaysRange = MIN(OpeningbarLow,Lowest[(i-b)+1](Low))
ENDIF

GapFillThreeDaysAgo = (OpenThreeDaysAgo < CloseFourDaysAgo AND HighThreeDaysAgo >= CloseFourDaysAgo) OR (OpenThreeDaysAgo > CloseFourDaysAgo AND LowThreeDaysAgo <= CloseFourDaysAgo)
GapFillTwoDaysAgo = (OpenTwoDaysAgo < CloseThreeDaysAgo AND HighTwoDaysAgo >= CloseThreeDaysAgo) OR (OpenTwoDaysAgo > CloseThreeDaysAgo AND LowTwoDaysAgo <= CloseThreeDaysAgo)
GapFillYesterday = (YesterdaysOpen < CloseTwoDaysAgo AND YesterdaysHigh >= CloseTwoDaysAgo) OR (YesterdaysOpen > CloseTwoDaysAgo AND YesterdaysLow <= CloseTwoDaysAgo)

IF i = b AND GapFillThreeDaysAgo = 0 THEN
IF OpenThreeDaysAgo < CloseFourDaysAgo THEN
IF HighTwoDaysAgo < CloseFourDaysAgo AND YesterdaysHigh < CloseFourDaysAgo THEN
UpsideGapThreeDaysAgo = CloseFourDaysAgo
UpsideGapThreeDaysAgoPoints = CloseFourDaysAgo-MAX(HighThreeDaysAgo,MAX(HighTwoDaysAgo,YesterdaysHigh))
DRAWSEGMENT(Barindex-b,UpsideGapThreeDaysAgo,Barindex,UpsideGapThreeDaysAgo) COLOURED(0, 255, 0)
DRAWTEXT("Upside gap three days ago #UpsideGapThreeDaysAgo# = #UpsideGapThreeDaysAgoPoints# points",Barindex,UpsideGapThreeDaysAgo+VOffset,SansSerif,Bold,12) COLOURED(0, 255, 0)
ELSE
UpsideGapThreeDaysAgo = Undefined
UpsideGapThreeDaysAgoPoints = Undefined
ENDIF
ELSIF OpenThreeDaysAgo > CloseFourDaysAgo THEN
IF LowTwoDaysAgo > CloseFourDaysAgo AND YesterdaysLow > CloseFourDaysAgo THEN
DownsideGapThreeDaysAgo = CloseFourDaysAgo
DownsideGapThreeDaysAgoPoints = MIN(LowThreeDaysAgo,MIN(LowTwoDaysAgo, YesterdaysLow))-CloseFourDaysAgo
DRAWSEGMENT(Barindex-b,DownsideGapThreeDaysAgo,Barindex,DownsideGapThreeDaysAgo) COLOURED(255, 0, 0)
DRAWTEXT("Downside gap three days ago #DownsideGapThreeDaysAgo# = #DownsideGapThreeDaysAgoPoints# points",Barindex,DownsideGapThreeDaysAgo+VOffset,SansSerif,Bold,12) COLOURED(255, 0, 0)
ELSE
DownsideGapThreeDaysAgo = Undefined
ENDIF
ENDIF
ENDIF

IF i = b AND GapFillTwoDaysAgo = 0 THEN
IF OpenTwoDaysAgo < CloseThreeDaysAgo THEN
IF YesterdaysHigh < CloseThreeDaysAgo THEN
UpsideGapTwoDaysAgo = CloseThreeDaysAgo
UpsideGapTwoDaysAgoPoints = CloseThreeDaysAgo-MAX(HighTwoDaysAgo,YesterdaysHigh)
DRAWSEGMENT(Barindex-b,UpsideGapTwoDaysAgo,Barindex,UpsideGapTwoDaysAgo) COLOURED(0, 255, 0)
DRAWTEXT("Upside gap two days ago #UpsideGapTwoDaysAgo# = #UpsideGapTwoDaysAgoPoints# points",Barindex,UpsideGapTwoDaysAgo+VOffset,SansSerif,Bold,12) COLOURED(0, 255, 0)
ELSE
UpsideGapTwoDaysAgo = Undefined
ENDIF
ELSIF OpenTwoDaysAgo > CloseThreeDaysAgo THEN
IF YesterdaysLow > CloseThreeDaysAgo THEN
DownsideGapTwoDaysAgo = CloseThreeDaysAgo
DownsideGapTwoDaysAgoPoints = MIN(LowTwoDaysAgo,YesterdaysLow)-CloseThreeDaysAgo
DRAWSEGMENT(Barindex-b,DownsideGapTwoDaysAgo,Barindex,DownsideGapTwoDaysAgo) COLOURED(255, 0, 0)
DRAWTEXT("Downside gap two days ago #DownsideGapTwoDaysAgo# = #DownsideGapTwoDaysAgoPoints# points",Barindex,DownsideGapTwoDaysAgo+VOffset,SansSerif,Bold,12) COLOURED(255, 0, 0)
ELSE
DownsideGapTwoDaysAgo = Undefined
ENDIF
ENDIF
ENDIF

IF i = b AND GapFillYesterday = 0 THEN
IF YesterdaysOpen < CloseTwoDaysAgo THEN
UpsideGapYesterday = CloseTwoDaysAgo
UpsideGapYesterdayPoints = CloseTwoDaysAgo-YesterdaysHigh
DRAWSEGMENT(Barindex-b,UpsideGapYesterday,Barindex,UpsideGapYesterday) COLOURED(0, 255, 0)
DRAWTEXT("Upside gap yesterday #UpsideGapYesterday# = #UpsideGapYesterdayPoints# points",Barindex,UpsideGapYesterday+VOffset,SansSerif,Bold,12) COLOURED(0, 255, 0)
ELSIF YesterdaysOpen > CloseTwoDaysAgo THEN
DownsideGapYesterday = CloseTwoDaysAgo
DownsideGapYesterdayPoints = YesterdaysLow-CloseTwoDaysAgo
DRAWSEGMENT(Barindex-b,DownsideGapYesterday,Barindex,DownsideGapYesterday) COLOURED(255, 0, 0)
DRAWTEXT("Downside gap yesterday #DownsideGapYesterday# = #DownsideGapYesterdayPoints# points",Barindex,DownsideGapYesterday+VOffset,SansSerif,Bold,12) COLOURED(255, 0, 0)
ENDIF
ELSE
UpsideGapYesterday = Undefined
DownsideGapYesterday = Undefined
ENDIF

IF i = b THEN
IF Open < YesterdaysClose THEN
UpsideGap = YesterdaysClose
UpsideGapPoints = YesterdaysClose-Open
DRAWSEGMENT(Barindex-b,UpsideGap,Barindex,UpsideGap) COLOURED(0, 255, 0)
DRAWTEXT("Upside gap #UpsideGap# = #UpsideGapPoints# points",Barindex,UpsideGap+VOffset,SansSerif,Bold,12) COLOURED(0, 255, 0)
ELSIF Open > YesterdaysClose THEN
DownsideGap = YesterdaysClose
DownsideGapPoints = Open-YesterdaysClose
DRAWSEGMENT(Barindex-b,DownsideGap,Barindex,DownsideGap) COLOURED(255, 0, 0)
DRAWTEXT("Downside gap #DownsideGap# = #DownsideGapPoints# points",Barindex,DownsideGap+VOffset,SansSerif,Bold,12) COLOURED(255, 0, 0)
ENDIF
ELSE
UpsideGapYesterday = Undefined
DownsideGapYesterday = Undefined
ENDIF

RETURN // YesterdaysOpen COLOURED(255, 215, 0) STYLE(Line, 1) AS "Yesterday's Open", YesterdaysHigh COLOURED(0, 255, 0) STYLE(DottedLine, 1) AS "Yesterday's High", YesterdaysLow COLOURED(255, 0, 0) STYLE(DottedLine, 1) AS "Yesterday's Low", YesterdaysClose COLOURED(0, 0, 0) STYLE(Line, 1) AS "Yesterday's Close", OpenTwoDaysAgo COLOURED(0, 0, 0) STYLE(Line, 1) AS "Open two days ago", HighTwoDaysAgo COLOURED(0, 255, 0) STYLE(DottedLine, 2) AS "High two days ago", LowTwoDaysAgo COLOURED(255, 215, 0) STYLE(DottedLine, 2) AS "Low two days ago", CloseTwoDaysAgo COLOURED(0, 0, 0) STYLE(Line, 2) AS "Close two days ago", OpenThreeDaysAgo COLOURED(255, 215, 0) STYLE(Line, 1) AS "Open three days ago", HighThreeDaysAgo COLOURED(0, 255, 0) STYLE(DottedLine, 2) AS "High three days ago", LowThreeDaysAgo COLOURED(255, 0, 0) STYLE(DottedLine, 2) AS "Low three days ago", CloseThreeDaysAgo COLOURED(0, 0, 0) STYLE(Line, 2) AS "Close three days ago", OpenFourDaysAgo COLOURED(255, 215, 0) STYLE(Line, 1) AS "Open four days ago", HighFourDaysAgo COLOURED(0, 255, 0) STYLE(DottedLine, 2) AS "High four days ago", LowFourDaysAgo COLOURED(255, 0, 0) STYLE(DottedLine, 2) AS "Low four days ago", CloseFourDaysAgo COLOURED(0, 0, 0) STYLE(Line, 2) AS "Close four days ago"// , TodaysOpen COLOURED(255, 255, 0) AS "Today's Open", Stoploss COLOURED(255, 0, 0) AS "Stop loss (for longs)"