Gap Fill Reversal Strategy Diagram
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The diagram measures the jump between the close of one candle and the open of the next, and then waits for that candle to close back in the opposite direction. A gap down followed by a bullish candle is bought, a gap up followed by a bearish candle is sold, and a SimpleMovingAverage decides when the trade is over.
Strategy Overview
- The gap is expressed in percent of the previous close, so the same threshold keeps its meaning at any price level.
- A gap alone is not a signal: the candle that opened away from the previous close has to close back towards it, which is the reversal body the strategy is named after.
- SimpleMovingAverage is the only exit line, used by both sides; there is no stop loss and no take profit.
- The diagram runs on one-minute candles, so a gap here is the small discontinuity between two neighbouring minutes rather than an overnight gap.
Entry and Exit Rules
- Long entry: The distance between the open and the previous close is at least Min Gap %, the open is below the previous close, the candle closes above its own open, and the position is flat. The order buys one lot at market.
- Short entry: The distance between the open and the previous close is at least Min Gap %, the open is above the previous close, the candle closes below its own open, and the position is flat. The order sells one lot at market.
- Exit: A long is given back on the first candle that closes below SimpleMovingAverage, a short on the first candle that closes above it; both closing blocks work the volume out from the open position themselves.
Parameters
| Parameter | Default | Description |
|---|---|---|
| Min Gap % | 0.02 | Minimum distance between the previous close and the new open, in percent of the previous close. |
| SMA Length | 20 | Averaging length of the SimpleMovingAverage that closes the position. |
| Volume | 1 | Order volume, in lots. |
| Candles | 00:01:00 | Candle time frame the whole diagram works on. |
Diagram Details
- Two converter blocks read the open and the close of the candle, and a previous-value block keeps the close of the candle before it.
- The formula block turns the distance between the open and the previous close into a percentage, and one comparison holds that percentage against the threshold constant.
- Four further comparisons give the side of the gap and the side of the body; each logical AND joins a gap condition, a body condition and the flat-position check before the order block.
- The exit pair compares the close with the moving average and drives two close-position blocks.
Usage
Import the .json file into Designer, run it in the backtester on historical data, then adjust the parameters or the blocks themselves to fit your instrument before trading it live.