Exhaustion Gap Reversal for ThinkorSwim

BenTen

Administrative
Staff member
Staff
VIP
Lifetime
The concept of this indicator is simple. We look for exhaustion in gap up and gap down. Look for potential trade ideas the following day.
  • Stock gapped up but ended the day red. This indicates a potential bearish move.
  • Stock gapped down but ended the day green. This indicates a potential bullish move.
Whenever there is a gap up or gap down, the indicator will also plot the day's high and low levels onto the next trading day. Remember, the idea of this indicator isn't to trade on the day of the gap but the following day. We want to know if there is enough momentum/pressure to maintain the direction of the gap. If there isn't, it means a potential reversal play is in place.

Some examples:

We1AdI4.png


R5jYQnP.png


thinkScript Code

Code:
# Exhaustion Gap Reversal
# Assembled by BenTen at UseThinkScript.com

input aggregationPeriod = AggregationPeriod.DAY;
def open = open(period = aggregationPeriod);
def close = close(period = aggregationPeriod);
def h1 = high(period = aggregationPeriod)[1];
def l1 = low(period = aggregationPeriod)[1];
def prev_close = close(period = aggregationPeriod)[1];

def o = open;
def c = prev_close;

def gu = o > c;
def gd = o < c;

def diff = o - c;
def av = (o + c) / 2;
def d = (diff / av) * 100;

def gapup = gu and d > 1;
def gapdown = gd and d < -1;

def IsUp = close > open;
def IsDown = close < open;

AssignPriceColor(if gapdown and isUp then color.green else if gapup and isdown then color.red else color.gray);

def condition = gapdown[1] and isUp[1] or gapup[1] and isdown[1];

plot preh = if condition then h1 else double.nan;
preh.SetPaintingStrategy(PaintingStrategy.HORIZONTAL);
plot prel = if condition then l1 else double.nan;
prel.SetPaintingStrategy(PaintingStrategy.HORIZONTAL);

Scanner

Code:
# Exhaustion Gap Reversal
# Assembled by BenTen at UseThinkScript.com

input aggregationPeriod = AggregationPeriod.DAY;
def open = open(period = aggregationPeriod);
def close = close(period = aggregationPeriod);
def h1 = high(period = aggregationPeriod)[1];
def l1 = low(period = aggregationPeriod)[1];
def prev_close = close(period = aggregationPeriod)[1];

def o = open;
def c = prev_close;

def gu = o > c;
def gd = o < c;

def diff = o - c;
def av = (o + c) / 2;
def d = (diff / av) * 100;

def gapup = gu and d > 1;
def gapdown = gd and d < -1;

def IsUp = close > open;
def IsDown = close < open;

plot bullish = gapdown and isUp;
bullish.SetPaintingStrategy(PaintingStrategy.Boolean_arrow_Up);
plot bearish = gapup and isdown;
bearish.SetPaintingStrategy(PaintingStrategy.Boolean_arrow_DOWN);

Add the script above as an indicator, then switch over to the Scan tab and set up your scanner to something like this:

29TSVkY.png


The timeframe of your scanner should be set to D (Daily).

Keep in mind that this indicator does not specify the value of the gap. You may find some edge or increase your probability if you look for notable gap ups or gap downs. Small gaps tend to decrease the chance of a follow-through day. I hope that helps.
 
Last edited:

Join useThinkScript to post your question to a community of 21,000+ developers and traders.

Hey Ben: Looks like a good indicator. Question on scanning. I setup the indicator using the Thinkscript Code and when I try to set up the scanner, under Plot, I only get two choices which is "preh, and prel". I don't see "bullish" like in your example. Am I missing something? You have the code for the scanner......am I supposed to use this? If so, how? Thanks in advance.
I also inserted your scanner code in the Thinkscript Editor in the scanner, but I get a message below saying "exactly one plot expected" and it won't let me click OK.
 
Last edited:
@Tradervic There are two separate scripts. I included them both in the thread above. Use the second script if you want to run it as your scanner.
 

Similar threads

Not the exact question you're looking for?

Start a new thread and receive assistance from our community.

87k+ Posts
452 Online
Create Post

Similar threads

Similar threads

The Market Trading Game Changer

Join 2,500+ subscribers inside the useThinkScript VIP Membership Club
  • Exclusive indicators
  • Proven strategies & setups
  • Private Discord community
  • ‘Buy The Dip’ signal alerts
  • Exclusive members-only content
  • Add-ons and resources
  • 1 full year of unlimited support

Frequently Asked Questions

What is useThinkScript?

useThinkScript is the #1 community of stock market investors using indicators and other tools to power their trading strategies. Traders of all skill levels use our forums to learn about scripting and indicators, help each other, and discover new ways to gain an edge in the markets.

How do I get started?

We get it. Our forum can be intimidating, if not overwhelming. With thousands of topics, tens of thousands of posts, our community has created an incredibly deep knowledge base for stock traders. No one can ever exhaust every resource provided on our site.

If you are new, or just looking for guidance, here are some helpful links to get you started.

What are the benefits of VIP Membership?
VIP members get exclusive access to these proven and tested premium indicators: Buy the Dip, Advanced Market Moves 2.0, Take Profit, and Volatility Trading Range. In addition, VIP members get access to over 50 VIP-only custom indicators, add-ons, and strategies, private VIP-only forums, private Discord channel to discuss trades and strategies in real-time, customer support, trade alerts, and much more. Learn all about VIP membership here.
How can I access the premium indicators?
To access the premium indicators, which are plug and play ready, sign up for VIP membership here.
Back
Top