Gap-volatility Relation
By LuxAlgoMay 2, 2026
Gap-volatility Relation is an indicator on Vela, our next-generation charting platform, written in Pine Script®.
Gap-volatility Relation splits total variance into overnight and intraday components and plots the overnight share as a percentage, the gap-volatility relation turned into a chartable tool for the first time. The Overnight Variance Share line runs against a dashed High Share Threshold, and a dashboard adds component volatilities, gap expansion, frequency, fill rate and a regime read.
How to Trade the Gap-volatility Relation?
- Share above the threshold: gaps carry more variance than the sessions between them; range-based estimates understate risk and overnight exposure deserves scaling, with alerts both ways.
- Stressed regime: short-run gaps at 1.5x their baseline or more while recent significant gaps mostly go unfilled. Escalation, with a dedicated alert.
- Quiet regime: a gap expansion ratio at or below 0.75 marks contracted gaps.
- Large Opening Gap alert: a significant gap at least twice the baseline mean absolute gap.
Built for daily and higher charts; the dashboard warns when run intraday.
Gap-volatility Relation Settings
- Estimation Window (default 20): sessions behind the two sample variances; longer windows steady the share but react slower.
- Periods Per Year (default 252): annualization for the volatility readouts.
- High Share Threshold % (default 50): the dashed reference where gaps dominate.
- Minimum Gap Size % (default 0.2), Fill Window (Sessions) (default 1) and Gap Sample Size (default 10): the significant-gap definition and its statistics.
- Short Gap Window (default 10), Baseline Gap Window (default 63), Expansion Ratio (default 1.5), Contraction Ratio (default 0.75), Unfilled Threshold % (default 50) and Large Gap Multiple (default 2): regime and alert triggers.
- Show Dashboard (default enabled) plus toggles for component volatilities, gap marks and the regime highlight (all default disabled).
Frequently Asked Questions
Free to use
Run it on Vela. Go further with a paid plan.
- Up to 500 Custom Alerts, with webhook automation
- Up to 10× the chart history of Free
- Orderflow lookback up to full history
- More Quant usage to customize it, plus extra usage when you need it
- Futures data alongside crypto, stocks, forex and commodities
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