quickly through a price range. Therefore when you open your trading charts on Monday, you can see a gap. Right before the end of the weekly trading session (e.g., 5 minutes before the end) you need to close the position. The Pseudo Trading Gap There is another type of trading gap that doesn't get mentioned too much, but it is a pattern that you should still look out for. You need to choose a currency pair with a high level of volatility. Traders want to capitalize on the events and suddenly move the market in one direction. This was what the price action looked like when the situation in Greece was still up in the air. Exhaustion gaps occur near the end of a price pattern and signal a final attempt to hit new highs or lows. This will help ensure that the support will remain intact. Gap, fill, the most common way to trade a gap is to assume that it will get filled at some point.
This will indicate that the gap has been filled, and the price has returned to prior resistance turned support. When a new week starts look if there is a gap. For example, let's say a company announces great earnings per share for this quarter, and it gaps up at open (meaning it opened significantly higher than its previous close). Example, you can see GBP/JPY pair's last 7 weeks (as of May 24, 2010) and all of them have gaps.
Read 3rd Short Candlestick Forex Trading Strategy Heres and example of forex gap trading and how many pips made when the forex gap was filled: The forex gap trading strategy is an very simple and interesting price action trading strategy but here is the big. Gap trading can be an effective trading strategy that you can add to your arsenal. Read Breakout Forex Trading Strategy For gbpusd I have not done any analysis on this so I woundt say yes or not but from a few charts that Ive seen, price does seem to fill the forex gaps. Traders might buy when the price level reaches the prior support after the gap has been filled.
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For example, let's say that you always target 50 of the gap and you want a minimum. If you see high-volume resistance preventing a gap from being filled, then double check the premise of your trade and consider not trading it if you are not completely certain that it is correct. It is best to place the stop-loss point below key support levels, or at a set percentage, such as -8. Only the most liquid currencies should be considered when trading weekend gaps: EUR/USD, GBP/USD and USD/JPY etc. Stop losses should be adaptive to recent market volatility (higher volatility wider stops). There is a reason why trading of gaps occur. Source: fxcm tsii We can see in Figure 1 that the price gapped up above some consolidation resistance, retraced and filled the gap, and finally resumed its way up before heading back down. There must be a candle signifying a continuation of the price in the direction of the gap. So if you strategy is only gap trading, there will be weeks where you will not get gaps and there will be weeks where you will get gaps that you can trade. In the share market, share traders are known to trade gaps because it is much more common. A gap tends to get filled because the market wants to bring price back into balance after such a large imbalance.
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