Hey Trent,
My MRV system picked that one up too.
Which yesterday prompted me to do some testing on gaps.Starting with a gap on the buy set-up bar. For me, about 10% of trades had a gap greater than 1% between the high of the set-up bar and the previous days low.
The win% is basically the same as the rest of the trades, but the payoff ratio is about 30% higher, thus improving the profit factor. Thus for me, I could not find any reason to exclude placing such trades.
I have pasted the code I used below, you just need to add GapFilt to your buy set-up line.
Code:
_SECTION_BEGIN(“% Gap Filter”);
//———————————————————————————————————————-
// % Gap Filter
//———————————————————————————————————————-
GapPercent = Param(“Gap %”,1,0,20,1);
Gap = ((Ref(Low,-1) – High)/Ref(Low,-1))*100;
GapFilt = Gap > GapPercent;
//———————————————————————————————————————-
_SECTION_END();
Then I took a look at the trades that were filled on a gap big enough that the open was below my buy limit using the following code for the LE.
LE = Ref(BuySetUp,-1) AND Open <= Ref(BuyLimit,-1);
The only thing I changed was that open must be less than the buy limit price instead of the usual low less than the buy limit price.
Again, win% was the same, but payoff ratio is again about 30% higher than the whole sample.
What surprised me was that from the full sample, about 20% of trades were filled on the open.
So in summary, (for me anyway) trades with gaps either on the set up bar or on entry tend to be goods ones, likely because of the increased volatility.
So all in all, I’m sitting tight!
