By eliminating the effect of the overnight gap, the Gapless SMA 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 SMA can be used immediately because it automatically adjusts to any overnight gap. Other than the below description, you may also review our Gapless Indicator Spotlight (with video).
Indicator Description
The Gapless SMA is used for instruments 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 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. A significant price move that occurred overnight, will therefore create a price gap.
This represents a challenge for the standard SMA as the gap becomes as part of the lookback period. At the start of a new session, the gap first has to be eliminated from the SMA lookback period.
Specifically, the moving average used in the Gapless SMA, measures the difference between the prior day close and yesterday’s last indicator plot, transferring it to the current open. Other than adjusting for the overnight gap, the indicator also comes with an option to reset the calculation to start at the current open.
Other Library Indicators
The library also features the Gapless EMA, Gapless Keltner Channel, Gapless MACD, Gapless TEMA, Gapless WMA and the Gapless ZLEMA.
The Gapless SMA indicator is available for NinjaTrader 8
