The Gap Fill Mystery 63% ?? : I Backtested 1,145 Nifty Gaps—Here is the Cold, Hard Truth 📉🚀
Traders often say, "Every gap must be filled." But in the fast-paced world of Nifty trading, "always" and "never" are dangerous words. I put this popular theory to the ultimate test by backtesting 1,145 gap setups to see if they actually provide a trading edge or just "noise" in the system.
Key Takeaways
The Success Rate: Overall, Nifty gaps fill 57.38% of the time—better than a coin flip, but far from a "guarantee."
The "Gap Up" Edge: Gaps to the upside (Gap Ups) have a significantly higher fill probability at 63.10%.
The Gap Down Trap: Downward gaps only fill 50% of the time, making them much riskier to trade blindly.
Strategy over Myth: Trading gaps without knowing the direction-specific accuracy is a "Logic Error" in your trading plan.
The Hook
Is "Gap Filling" a reliable strategy or just a trading myth that leads to stop-loss hunting? I analyzed over 1,000 Nifty gap setups to find out exactly which gaps are worth your capital and which ones are likely to "run away."
1. The Backtest Protocol: Decoding the Gap
In my "Engineering Logic" framework, a gap is simply a "data jump" between yesterday's close and today's open. For this study, I used a multi-year dataset of Nifty 50 moves to track 1,145 trades where the market opened with a gap.
We defined a "Successful Fill" as a price move that revisited the previous day's closing level during the intraday session.
2. Gap Up vs. Gap Down: The 13% Accuracy Gap
This is where the data gets interesting. Not all gaps are created equal. If you treat every gap the same, you are missing a massive structural bias.
Why the difference? In a long-term bullish market like India, "buying the dip" is a core algorithm for many institutional players. When the market gaps up, there is often immediate profit-booking or a "mean reversion" move, leading to a higher fill rate. Gap downs, however, are often met with "buying interest" that prevents the gap from filling, resulting in a 50/50 "coin flip" outcome.
3. How to "Refactor" Your Gap Strategy
Based on this data, a professional trader shouldn't just "short the gap up" or "long the gap down." You need to filter the signals:
Priority 1 (High Probability): Look for intraday "Sell" setups on Gap Ups. With a 63% historical fill rate, the odds are in your favor for a mean reversion trade back to the previous close.
Priority 2 (Neutral): Be extremely cautious with Gap Downs. Since they only fill 50% of the time, you need additional confirmation (like a VWAP cross or a specific candle pattern) before betting on a fill.
The Personal View
As an AMFI Registered Distributor and Algo Trader, I view gaps as "System Latency." The market is trying to find a new equilibrium. My logic is simple: Don't fight the 63% probability. If you see a Gap Up, the data tells you that the "Gravity" toward the previous close is strong. But if you see a Gap Down, stay neutral—the "System" is equally likely to fill it or continue the slide.
Dhaval Visariya
AMFI Registered Distributor (ARN-327925) | Software Developer & Finance Enthusiast
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Disclaimer: I am an AMFI Registered Mutual Fund Distributor. Views expressed here are for educational purposes. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
📧 Contact: info.apollofinancialservices@gmail.com
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