Gap Absorption Strategy

Like the nature, markets don't like the void, and this is something we can take advantage of by trading gaps on some markets.
This technique is well known, so I wanted to write a tiny script based on this strategy to get a bit more comfortable with it.

IMPORTANT: Default parameters wont give you good trades on every markets, you need to modify these parameters to see which proportions correspond to the stock you're trading.

This script triggers signals on predefined variation of a stock price after a gap, and allows its user to configure TP and SL prices corresponding to a specific percentage of this gap movement.

Note: We can observe that opening gaps are often the most interesting.

  • Trigger: the price variation you want to trigger on (in % of the price)
  • Stop Loss : in % of the gap
  • Take profit : in % of the gap

  • A small table is displayed in the top right corner of the chart to give you TP/SL/Signal prices for each opportunity
  • SL (red line) and TP (green line) are also displayed on the chart when a signal is triggered
  • Information concerning the current opportunity is given at the bottom of the chart

Note: This script is based on the Gap-Size-Indicator that I published a few weeks ago.
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.


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