Gap Fill Probability

Two patterns that look identical on a five minute chart can carry vastly different statistical weights depending on the overnight session volatility. The analysis that orb trading expectancy tbcmikah publishes on this covers the gap fill probability following an opening range breakout. This specific intraday phenomenon occurs when price moves aggressively away from the previous day close during the first fifteen minutes of regular trading hours. Calculating the likelihood of a return to that prior close requires looking at the relationship between the opening bell momentum and the subsequent exhaustion of the initial trend.

Measuring the Gap Void

A gap exists when the market open occurs at a price level significantly distant from the prior day close. The distance of this gap dictates the potential magnitude of the fill. If the opening range establishes a clear direction without immediate rejection, the probability of a gap fill decreases. However, a failure to sustain the initial impulse often leads to a mean reversion. Data shows that a large gap followed by a narrow fifteen minute range often signals a lack of follow through. This setup suggests that the initial move was driven by liquidity gaps rather than sustained institutional interest.

Timeframe Sensitivity

The choice of timeframe alters the observed frequency of these fills. A thirty minute range often captures the full extent of the initial expansion before a reversal begins. Using a sixty minute range provides a broader view of the session high but may miss the entry point for a mean reversion trade. High conviction moves during the first hour typically establish the trend for the day. If the price remains outside the premarket high for an extended period, the likelihood of a gap fill diminishes significantly. A small sample overstates the edge in these scenarios.

Volatility and Volume Profile

Volume at the cash open provides the mechanical evidence needed to judge the strength of the breakout. High volume during the first five minutes that fails to push price into new territory suggests a heavy supply zone. When price hits a resistance level in the thirty minute range on declining volume, the probability of a return to the previous close increases. The relationship between the overnight session levels and the current trading range determines if the gap is a structural shift or a liquidity vacuum. A vacuum tends to fill quickly once the initial order flow stabilizes.

Probability Distributions

Statistical modeling of these moves shows that mean reversion is not a constant. It is a variable dependent on the size of the initial move relative to the average true range. An extreme opening range breakout often exhausts the available liquidity, leading to a period of consolidation. This consolidation frequently serves as the launchpad for a move back toward the previous day close. Tracking the session high and the session low allows for the calculation of the expected move. The math remains mechanical and does not rely on intuition.