Price Gaps Indicator: Open and Filled Gaps

What it shows

Shaded boxes on the price chart: green for up gaps and red for down gaps by default. A box that is still open runs to the right edge. A filled one ends at the candle that filled it. If nothing qualifies, a small note in the bottom right corner says no gaps were found.

How Pravex works it out

1. Work out the typical candle size: the average of high minus low over the last 14 candles, the current one included.
2. A candle opens an up gap when its low is above the previous candle’s high, and a down gap when its high is below the previous candle’s low. The space between those two prices is the gap. Pravex compares whole candle ranges, not the open against the previous close, so a candle that opens away from the close but still overlaps the previous range is not a gap.
3. The gap must be at least the smallest gap size (30 percent of it by default) of the typical candle size from step one, or it is ignored.
4. The box starts on the candle before the gap and stays open. On each later candle, if its range reaches into the box, the box ends there. The candle that creates a gap cannot close it. With partial closing on, only the part price entered is closed: the box ends at that candle and the untouched part carries on from there, shrinking each time, until a candle covers what is left.
5. Only the newest gaps are drawn (15 by default), open or filled. If the trail cap is on, a gap still open after that many candles is closed at that point.

Settings

Setting	Default	What changing it does
Shrink gaps as they fill	off	Off, a gap closes the first time a candle enters it. On, a candle that only enters part of it closes that part and the rest stays open.
How many gaps to keep	15	How many of the newest gaps are drawn, counting both open and filled ones. Raise it to see older gaps; the app allows up to 500.
Smallest gap size (% of a typical candle)	30	The smallest gap shown, as a percentage of the average candle range of the last 14 candles. Lower it to see small gaps (and more boxes), raise it to keep only the big ones.
Stop extending after (candles)	off, 300	When on, a gap is closed after that many candles even if price never returned to it. The second value is the number of candles, 300 by default.

How traders read it

Many traders watch an open gap as a level price may come back to, and treat its edges as places to look for support or resistance. Others wait to see whether the gap fills before taking a view. No rule says a gap must fill, and some stay open for a long time.

An example, numbers made up: a box covers 100 to 102 and stays open for a week. The traders who use gaps would mark 102 and 100 as the two prices to watch on a return, and take a fill of the whole box as the gap being finished.

When it misleads

What counts as a gap depends on the candles you look at. Gold trades almost around the clock and the Pravex chart has candles only while the market is open, so the gaps this finds tend to sit at the reopen after a weekend or the daily break, between the last candle before it and the first one after. On shorter candles you get more small ones, and a lower smallest-gap size adds many tiny boxes. A filled gap here only means a candle’s range touched the box, not that price closed through it.

Questions and answers

How does the Gaps indicator find a gap?

It compares each candle with the one before. If the whole range sits above or below the previous range, the space in between is a gap, provided it is at least the smallest-gap percentage of the average candle size.

Do gaps always fill?

No. Some close within hours and others stay open for months. The indicator only shows which ones are still open, it does not say which will fill.

Why does it say no gaps were found?

Either the market has not left any gap on the candles loaded, or the smallest gap size is set too high for them. Lower it and the note usually goes away if smaller gaps exist.

What happens when price only dips into a gap?

With the shrink option on, a candle that dips into a gap without covering it closes only the part it covered, and the rest of the box keeps extending.

Related: Pivot Points High Low, Pivot Points Standard, Multi-Time Period Charts, every indicator.