Profitable Gap Trading with i-GAP MT4 Indicator
The i-GAP MT4 Indicator is a trading strategy which aims to identify gaps in the charts for assets that are traded on the MT4 platform. The assets traded on a typical MT4 platform include not just currencies, but stocks, stock indices and commodities. Several gap trading strategies exist in the market. Some aim to trade in the direction of the gap, and others may trade the price closure of the gap. By identifying the existence of a gap and showing a direction arrow in the opposite direction, the i-GAP MT4 indicator employs a gap closure trading strategy which can be exploited by the trader for profits.
MetaTrader4 Indicators: i-GAP MT4 Indicator.ex4.
The settings must be modified by clicking Insert -> Indicators -> Custom -> i-GAP MT4 indicator.ex4 -> Input (on the pop-up window). Two inputs are seen with the indicator: SizeGAP and NumberOfBars. A
djust the SizeGAP from the default number (5) to a minimum of 30. This action will serve to filter out many arrow signals which will not provide much profit if traded. The trend line tool is also used to provide a filter for trades.
Traded Assets: The strategy must be traded only on stock indices, stocks and commodity assets listed on the MT4 platform. If your platform does not show these assets by default, press “Ctrl + U” or click on View -> Symbols. Click on each of the stock, index or commodity assets to highlight them so they become visible in your market watch window.
The reason why we do not trade currencies with this strategy is because gaps tend to occur more frequently in other asset classes than in currencies. Gaps in currencies usually occur after the weekend when there has been severe volatility in a currency pair on the Thursday/Friday of the previous week. These gaps are also unpredictable. So trade the gaps that occur in the stock, stock index or commodity assets.
i-GAP MT4 Indicator Strategy and Trading Rules
The i-GAP MT4 indicator will show an arrow on a candle where the gap trading opportunity occurs. The gaps are very hard to pick out with the naked eye. However, a comparison of the closing price of a candle and the opening price of the next candle will show the difference between both and hence the gap opportunity.
The indicator works using the gap closing strategy. A direction arrow will appear to indicate the trade direction. A trend line which identifies either support or resistance situations provide the impetus for entries in both long and short directions respectively.
i-GAP MT4 Indicator Long Trade Entry Rules
A long trade entry is made when the following setup is displayed on the chart:
- The trade trigger is a blue arrow which points upwards, located under a candle.
- Check if this candle’s low rests on a support line drawn across previous candle lows, if this exists.
- Execute the trade if the above conditions are satisfied.
In this chart, three areas where long trades can be setup are shown. We can see the support lines (blue in colour) and the profit areas which are identified as areas where price has stalled or where a previous resistance exists.
Stop Loss and Take Profit Settings
The entry made at the support line allows the trader to set very tight stops. The trader should set the stop loss below the support line.
The Take Profit point will naturally be at the next key area of resistance, or an area where price has stalled. These are shown in the chart.
i-GAP MT4 Indicator Short Trade Entry Rules
A short entry is performed when the following setup occurs on the charts:
- A red arrow which points downwards appears on a candle. At this point, you should check to see if you can draw a trend line across previous candle highs, and include the high price of the candle with the arrow.
- With the trend line serving as a resistance, open a short trade on this candle.
On this chart, we see two trade opportunities. The 1st trend line (resistance line 1) serves as the take-off point for the 1st trade. The 2nd trend line (resistance line 2) serves as the take-off point for the 2nd trade. For trade 1, the purple line connecting the lows acts as a support and therefore the reference point for taking profit.
Stop Loss and Take Profit Settings
The entry made at the resistance line allows the trader to set very tight stops. The trader should set the stop loss above the resistance line, above the most recent candle highs so that any attempt by price to move above the resistance does not trigger off the stop loss.
The Take Profit is set using a previous support as a guideline. If downward price movement has started to stall, you may also close the trade manually.
i-GAP MT4 Indicator – Recommended Time Frames
Technically speaking, you can use this MT4 indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.
How to Trade Gaps Profitably – Video Tutorial
How to trade Gaps Profitably Video Tutorial
i-GAP MT4 Indicator Download
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