Gamma Bands as “next-generation” Intraday levels

13/06/2021 Yorgwarez

A lot of traders have met or even use Pivot Points every day to trade Intraday – which I do not need to explain. But are they effective? The obvious answer will be the famous “it depends”. As it usually depends on: market, volatility, day, moon phase, month, and many other more obvious or less obvious factors. I myself find the pivot points a helpful indicator for intraday trading, while the effectiveness is often disappointing. Therefore, the more effective successor is Gamma Bands.

The principle of operation is the same as for the Pivot points. However, the principle of calculating levels is completely different. Compared to the pivot points, data from the option market, the volatility of the underlying instrument (separate derivatives showing the volatility of the underlying instrument, the flagship example – VIX / SP500), yesterday’s levels, volume and standard deviations are used. Using all these elements, it is possible to designate 3 levels of support and resistance. In the attached example you can see how, in this case, Dax often reacts literally to a point and returns to one of the Gamma levels.

Of course, this is not a golden grail, so it is most effective to combine Gamma levels with other indicators – such as pure Price Action, volume responses at Gamma levels, convergence of supply / demand zones with Gamma levels. Another strong signal is the body piercing of the Gamma level candle, where the next Gamma level automatically becomes the natural target. Breaking extreme Gamma levels (yes, it does happen sometimes) means nothing more than a market anomaly and trend day. So already on these examples we can see many examples of additional information to be used in trading.

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Intraday Trader, trading mainly on Dax, S&P500 and Gold. Passionate of new technologies and ex-developer. Currently creating software after hours in order to improve Trading and perform automatic analysis on as big scale as possible. Not trying to predict future, however always having plan and possible scenarios to play.

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