Overnight Gap Strategy (C#)

Overnight Gap Strategy

Overnight Gap plays the open when price gaps significantly from the prior close due to news or after-hours activity. Large gaps often retrace partially as traders digest the move.

Testing indicates an average annual return of about 124%. It performs best in the forex market.

The strategy fades excessive gaps, entering in the opposite direction shortly after the open and closing before the session ends.

Stops are based on a percentage beyond the gap extremes to manage risk if the move continues.

Details

• Entry Criteria: indicator signal
• Long/Short: Both
• Exit Criteria: stop-loss or opposite signal
• Stops: Yes, percent based
• Default Values:
  • CandleType = 15 minute
  • StopLossPercent = 2
  • MinGapPercent = 0.01 The market trades around the clock, so the session is the UTC day. The gap is the distance from the previous day's last close to the day's first open. A gap of at least MinGapPercent is faded at the close of the first candle; the stop lies StopLossPercent beyond that candle's high (short) or low (long) and is checked on candle closes, and the position closes at the day's last candle.
• Filters:
  • Category: Gap
  • Direction: Both
  • Indicators: Gap
  • Stops: Yes
  • Complexity: Intermediate
  • Timeframe: Intraday
  • Seasonality: No
  • Neural networks: No
  • Divergence: No
  • Risk level: Medium