2010issue C0824-26
Filtered gap follow-through entry rules
A gap-day is only the first piece of construction: the range must not overlap the prior session, a trend-filter must agree, and a next-session follow-through-breakout must print before the short three-day-sequence can fire. The workflow is a constructive-gap-framework for testing entry, abstention, and stop rules, not a finished trading system.
- Treat a session as a gap-day only when today's high-low range does not intersect yesterday's range. An open beyond the prior extreme that then trades back through it is not a gap-day.
- The trend-filter keeps only with-trend candidates: an up-gap when the latest close is above the 200-day closing-price average, and a down-gap when the latest close is below it.
- Entry waits for follow-through-breakout. The next session must take out the up-gap day's high for a long candidate or the down-gap day's low for a short candidate.
- The illustrated three-day-sequence then exits by stop, target, or the close of the day after entry, because next-day follow-through does not always continue in the anticipated direction.
Build the rule before the entry fires
This article records a constructive-gap-framework. It turns a common chart event into testable entry, abstention, and risk rules rather than a finished system.
A gap is treated as a temporary demand or supply imbalance that can reverse once that imbalance is spent. An unfiltered fade-or-chase of every gap is therefore rejected. The historical workflow asks whether a gap-day, a trend-filter, and a follow-through-breakout are all present before a short-horizon rule set can fire.
Define a non-overlapping gap-day
An up-gap is defined only when today's low sits entirely above yesterday's high. A down-gap is defined only when today's high sits entirely below yesterday's low.
A session is not treated as a gap-day if today's high-to-low range intersects yesterday's high-to-low range. That exclusion includes cases that open beyond the prior extreme and then trade back through it. Same-day-only events that never leave a clean range are discarded before any entry rule is allowed to form.
Keep only with-trend candidates
A closing-price 200-day moving average is used as a trend-filter. Only up-gap candidates are considered when the latest close is above the average, and only down-gap candidates when the latest close is below it.
Trend alignment is part of the entry procedure, not an optional overlay. Without the trend-filter, a gap-day remains an unclassified imbalance rather than a candidate.
Wait for next-day follow-through-breakout
A long candidate requires the next session to take out the up-gap day's high. A short candidate requires the next session to take out the down-gap day's low. That next-session move is the follow-through-breakout.
Until the follow-through-breakout prints, the rule set does not fire. Confirmation is postponed by one session so the gap-day itself is never the entry bar.
Manage the three-day-sequence
Because entry waits for next-day follow-through, the illustrated long sequence looks for an exit by stop, target, or the close of the day after entry.
The illustrated long path is: close above the 200-day average with today's low above yesterday's high; next day trade above the gap-day high to enter; then manage the position no later than the following session. The same clock applies on the short side after a filtered down-gap and a break of the gap-day low.
A study scaffold, not a finished system
The procedure is presented as a constructive way to study gaps and discard same-day-only events, not as a finished trading system.
Editorial note: TradersWeek keeps that limit in place. The constructive-gap-framework is a teaching scaffold for entry, abstention, and risk rules. It is not an instruction to trade the three-day-sequence as a complete method.
All readings on this track · 11 readings
- 1987Broken bias: stops, cash flow and unfilled gaps
- 1999A surviving weekly gap still needs a confirmation-breakout
- 2000Repeatable volume-price silhouettes as falsifiable hypotheses
- 2004Constructing pivot commonality across timeframes
- 2005A finished crude-oil top as a classroom for necklines, candles, and gaps
- 2007Journal a gap breakout as three sequential gates
- 2008Same-open kicker as a two-bar reversal case
- 2010Filtered gap follow-through entry rules
- 2010Cloudbank overhead resistance and breakout recovery
- 2015Post-exit cooldown as a system rule
- 2018Classifying chart gaps before fill or follow