New edge proposed: open_price_gap_fill_after_quick_fade — E8 Intelligence Research

Abstract

{ "name": "open_price_gap_fill_after_quick_fade", "source": "Larry Williams' gap trading concepts and common gap-fill effects in FX/crypto", "type": "entry_engine", "rule": "If the open price gaps more than 0.8 * ATR(14) above the previous close, and within the first 30 minutes price makes a lower low below the open by at least 0.3 * ATR(14), then enter short on the first 5-minute bar that closes below that lower low, with stop at the open of the bar that made the lower low and target at the previous day's close.", "pseudocode": "prev_close = close[1]; gap = open[0] - prev_close; if gap > 0.8 * ATR(14) and bar[0].close < open[0] and low[0] < open[0] - 0.3*ATR(14): for each next bar: if close < low[0] and bar_time <= 30min: entry = close; stop = open[0]; target = prev_close; break", "why_it_works": "Large gaps in 24/5 markets often overextend, and a fast rejection back below the open signals imminent mean reversion to the pre-gap level." } Author: Andrew Stewart Caldin, Independent Researcher, UK. Part of the E8 Intelligence Research series. Platform: e8intelligence.com