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Comments including inappropriate will also be removed. Thanks for the post it's helpful I've been trying to learn more about FOREX. its some sort of online training but the good stuff is 1hr in so id watch till that point. Your Name. Email address Required. Add your comment. The reason is that the profit could be negligible when you factor in the spreads of your broker and the volatility of the currency pair.

Speaking of volatility, a gap should fill within the next 24 hours on most volatile currency pairs. This is the time to take your profit. However, sometimes the reversals from the gaps keep going on for a while, turning gaps into exhaustion gaps. So, to help you prepare for such situations, take half of your profit off the trade and move the stop loss to break even after the price completely fills. This is another forex gap trading strategy that's based on the filling tendencies of the forex chart.

And it is also one of the many effective ways of trading support and resistance. When exploiting this gap trading strategy, mark the level where the gap has begun.

After the gap fills and the price falls back to the level you have marked, buy or sell in the direction of the gap. Place your stop loss level somewhere below the candlestick that initiated the gap. You can rely on any take-profit strategy to cash in your profits if the trade goes in your favor. Trading the breakout of a gap is very similar to trading the support and resistance strategy that we've mentioned above. They both rely on the tendency of a gap to form a support or resistance zone, which the price may retest.

However, these two strategies focus on two different directions the price moves in, when it hits this support or resistance zone. The forex gap trading strategy is an interesting price action trading system that is based on a phenomenon known as the forex gap. A forex gap happens when the opening price of candlestick is not the same as the close of the previous candlestick. In the forex market, gaps are not as frequent as in the share market.

The gaps in forex tend to happen when the market closes on Saturday and Opens On Monday. There is a reason why trading of gaps occur. The main idea or concept of gap trading is that p rice will always try to fill the gap.

Well, for one, it is said that because there is no support or resistance in the gap, price has freedom and room to move inside the gap.

The forex gap itself takes its origin in the fact that the interbank currency market continues to react on the fundamental news during the weekend , opening on Monday at the level with the most liquidity. Generally it is assumed that for gap trading to happen, price must fill the gap on the next day etc.

While occurring in trading as empty spaces between the opening and closing of a trade, a gap cannot be avoided in financial trading. Gaps are most common in stock trading but also occur less frequently in forex trading. Understanding the gap forex concept, significance, and gap trading strategy is essential for success in forex trading.

Gaps are acute interruptions in price without any trade taking place in between. They can either move up or down. In forex trading, forex gaps take place when there is no trade, particularly at the weekends and holidays.

At such times forex trading is closed. Furthermore, gaps happen within very short time frames like in a one minute chart or immediately after significant announcements. The significant announcements include economic data release and forex events with global impacts such as the coronavirus pandemic and discovery of drugs to fight the virus.

Technically, gap candle in forex is the difference between the closing price of a previous candlestick and the opening price of the next candlestick.

After a bullish gap up or bearish gap down, prices often reverse to fill the market gap forex. Gap meaning is a simple concept, and market gap forex occurs because the forex market is closed for weekends and holidays but remains active for international banks. Gap forex gives an indication of market sentiment towards a foreign exchange currency.

Technically a gap down candlestick pattern indicates that no investors were willing to purchase at the price gap. On the other hand, when the market exhibits a gap up candlestick pattern implies a lack of investors willing to sell at the price gap.

Nevertheless, it is possible to gap beyond your stop order and get settled at a reduced price than the stop order. At times forex gaps lead to corrective price action — after a gap, forex prices tend to reverse and fill up the gap.

Following the forex gap fill, the price gap mostly changes directions to continue in the direction of the gap. After all, the forex news that ignited the forex gap in the market is still active. The fading gap happens when the price gap is refilled within the same day. Some forex traders generally stay away from the forex market when there is a forex gap. These traders fear forex gaps as it always leads to slippage , thus affecting the execution of stop and limit orders.

Gap up down strategy can be risky and may result in losses. But another crop of traders views forex gap trading simple and profitable. To them, a gap in the market presents golden opportunities to make money with a fixed stop-loss, a predictable take profit size, and a favourable pattern. To make winning trades, traders have to consider gap levels, and gap filling in their gap up and gap down strategy.

Gap up candlestick pattern shows areas of support, whereas the gap down candlestick pattern indicates the resistance level. Based on the time when the gap occurs, forex gap is divided into the weekly and intraday gap as outlined below:.

FX currency trading ends typically on Friday and resumes only on Sunday night. Over the weekend some fundamentals forex news may develop, causing a rapid change in the closing price of a currency pair. Weekly gaps are easily seen on the gap up chart pattern on most timeframes. The gap in forex trading can also happen within a day, though rarely compared to the weekly forex gap. It usually occurs following a major economic report release or international news of extraordinary events.

After such events, forex investors change their forex sentiments and gravitate towards placing new orders at new prices that are higher or lower than the current forex market prices resulting in price breaks.

The breakaway gap: this occurs as a trend pattern ends and another one kicks in. Breakaways are not readily tradable. Runaway gap: they typically occur in a price trend. The runaway gaps are safe and easy to trade as traders can easily predict its trend direction. The exhaustion gap: exhaustion gaps occur at the end of a trend indicating final moments before price gap forex reversal.

The common gap: among the four groups of gaps, the common gap is widely traded and loved by many traders. while being safe to trade , they usually appear late Sunday or early Monday. They also occur after major holidays and important forex news. Gap trading strategy in forex is based on weekly gap-filling, which means the price gap has resided to its original pre-gap level.

Every Monday morning, after the forex market opens, there is always a price gap filling within the first hour of opening. When using gap trading strategy, there are essential factors to consider:. Signal: price gap forex forms as trade resumes after a weekend or holiday. In the event that a forex pair gaps up as trade resumes on Monday opening, it is advisable to sell — open a downward trade. The best time to enter a trade is 30 minutes after the market opens.

Within the first 30 minutes, the market is adjusting towards a gap direction. As the initial candlestick closes M30 timeframe, enter into a new position in line with gap filling. Your target should be the week ending closing level. However, the price gap may, at times go against you; thus initiate a stop-loss order to protect yourself. To determine a suitable stop loss level multiply take profit size by 1. Moreover, do not forget to trade within your limits by using an acceptable risk per trade.

This move is essential because it is not always that the price gap gets filled in your favour, and you may incur losses. Trading in the empty spaces between opening and closing trades is both risky and profitable as nothing is guaranteed in forex trading.

Learning fundamentals and technical analysis basics are the foundation of gap trading strategy in forex. Changes in fundamentals and technical lead to forex gaps. An effective way to test a gap up and gap down strategy is at the free demo account or paper trading.

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Log into your account. Gap forex gives an indication of market sentiment towards a foreign exchange currency. The forex gap itself takes its origin in the fact that the interbank currency market continues to react on the fundamental news during the weekend , opening on Monday at the level with the most liquidity. Learn basic Sentiment Strategy Setups. After all, the forex news that ignited the forex gap in the market is still active. A forex gap happens when the opening price of candlestick is not the same as the close of the previous candlestick. Gaps can be important in trading because there is a widely held belief among traders that gaps are usually filled quite quickly, which provides an opportunity for Forex traders to make a likely profit, because the most likely short-term direction of the price can be successfully predicted.

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