To begin, we must define what is a "Gap" ; it is the difference between prior session Close and current session Open.
This definition limits the number of markets where this definiton is valid to apply ; We need an instrument with a well defined Day Session time like Standard and Poors ( ES ), where there is a 24 Hours Market, but the main Volume is in the Day Session Trading Time.
If the Gap ( Yesterday's Close - Today's Open ) is greater than a certain value ( usually 2 to 3 points in ES ) then we consider there is an Open Gap.
The Open Gaps are followed by lot of Traders, so its importance as Support and Resistance is huge. If We are not following this Strategy, We should at least have into account the existent Open Gaps, to act according to their location. For example, taking a partial or total profit slightly before the next Open Gap is a good idea to start.
In the following picture, we can see a recent example from December 28, 2012:
Another examples form November 2012
These example pictures are using the Indicator OpenGap for NinjaTrader, that can be obtained on the following link
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Regards,
Pablo Maglio
www.TheIndicatorStore.com
www.TheIndicatorStore.com
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