Gapless MACD

gapless macd indicator

By eliminating the effect of the overnight gap, the Gapless MACD transitions smoothly between the previous close and the current open. Instead of waiting for the lookback period to eliminate a gap from its calculation, the Gapless MACD can be used immediately because it automatically adjusts to any overnight gap.

Indicator Description

The Gapless MACD indicator is used for instruments and session templates that have a price gap between yesterday’s close and the current open. Overnight gaps occur with instruments that do not have an overnight trading session. For example, the FDAX benchmark index for the Germany equity market is closed from 10:00 PM until 8:00 AM local time. Therefore, significant fluctuations in Asian markets may create price gaps that reflect the overnight price action.

Likewise, gaps will appear if you use a session template that only displays the regular trading session. The CME US Index Futures RTH template will only show price data from 8:30 AM to 3:15 PM Central Time, so any significant price moves that occurred overnight, will create a price gap.

This represents a challenge for the traditional MACD indicator  because the gap is factored in as part of the lookback period. Therefore, at the start of the new session, you’ll have to wait until the gap is eliminated from the MACD lookback period before using it.

Specifically, the moving averages used in the Gapless MACD indicator, measures the difference between the prior day close and yesterday’s last indicator plot, transferring it to the current open. Available moving average calculations include the Gapless EMAGapless SMA, Gapless TEMA, Gapless WMA and the Gapless ZLEMA. Other than adjusting for the overnight gap, the indicator also comes with an option to reset the calculation to start at the current open.

The library also features a Gapless Keltner Channel and we discussed the general application of Gapless Indicators in our Indicator Spotlight newsletter. Finally, Ichimoku Kinko Hyo, also discussed in our Indicator Spotlight, has certain similarities to the MACD and the Donchian Channel mid line.

The Gapless MACD indicator is available for NinjaTrader 8.