ADX and overnight gap

Discussion in 'Technical Analysis' started by robinxing, Jun 14, 2007.

  1. I am a day trader

    I use ADX as a filter to determinate the market type

    but overnight gap will have a great impact on the ADX

    I wanna eliminate the impact

    is there any way ?

    thank you
  2. Ask any carpenter or mechanic about using the right tool for the right job. Since you used the phrase "overnight gap" one would assume you're not thinking in a day trading context.

    As such, IF you're using ADX as Wilder intended, measured in DAYS, with a default of 14, a typical gap, less than 2.5%, would have have minimal impact. A is for average. Only slightly more at 9 days. Shorter than 9 days, an ADX is dubious.

    Overnight gap would impact ATR. Provokes adjusting position size IF the gap holds. Ditto for mental stops.

    Gaps vary. A big gap up could be construed as a break-a-way. IF long, I'd consider it a gift and book it. IF flat, not only would the gap have to hold but exceed the opening range (clearly the low made first) for me to entertain entry.