- Definition of "Gap" in Forex Trading
- Mengenai Saya
- What is liquidity and why is it important?
- Forex Gap – an interesting trading system
- The Importance of Liquidity in Forex Trading
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.
Definition of "Gap" in Forex Trading
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. The forex gap trading strategy is an very simple and interesting price action trading strategy but here is the big issue with it:you will not get many forex gap trade setups if you are just trading a few currencies.
Remember you only check for gaps once a week, on Monday.
Mengenai Saya
The example above shows how the price breaks all vital camarilla pivots and proceeds upwards without a sign of a possible gap close. Runaway gaps usually form within a trend.
As a rule, traders want to see the gap close first before they assume the possible continuation of price momentum in the trend direction, which means that these gaps are traded after the fact. Exhaustion gaps are mostly found in stock markets, but they can also exist in Forex, although rarely. Exhaustion gaps are formed towards the end of the previous trend and indicate the final push in momentum before prices start to lose it and reverse.
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Exhaustion gaps are only tradable after the fact. They need to be identified first, and then, traders start trading a new trend. The common gap is the most widely traded gap and, in my opinion, also the safest one to trade. Common gaps are likely to be filled within several price bars and might therefore be appropriate for a short-term intra-day trading. Traders tend to look for these gaps around midnight market opens.
What is liquidity and why is it important?
The presence of a chart pattern that defines the gap is essential. Gappage can also occur when trading resumes after a weekend or holiday, especially if major news has been announced. Due to the volume and liquidity of the Forex market, gaps usually surface during the time.
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I particularly trade Forex common gaps that appear on early Monday late Sunday open. How do we know if the Forex market will open with gaps? I usually look for important events, rumours, or news announcements that happen over the weekend. If that's the case, we might expect a gappage. Forex enthusiasts trade the weekend gap by expecting Sunday's opening price to return to Friday's closing price.
Forex Gap – an interesting trading system
Here is one of the Forex gap trading strategies:. Usually, Australia's Sydney market liquidity is a bit thin. A better trading volume is usually captured during the Tokyo market open, currently at GMT. This is the time when traders would see their positions usually moving towards the gap close if the common gap is spotted.
Gap trading is tricky, but if you know which gaps are tradable and which are not, it should be a lot easier. Try to spot different gaps on your platform and observe how the price behaves after the formation of a gap.
The Importance of Liquidity in Forex Trading
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