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Trade
The gap in trade
What is the gap in trade? Gap (gap "the gap") on Forex market represents the gap between adjacent quotes are larger than the minimum step of price change. This definition can be considered too detailed, since, in practice, not talking about the gap, if the gap between adjacent prices, which have appeared on the market one after the other, very small. For example, if the market we observe the current market price, and the following modification sets the course for few pips above, traders will probably pay on the situation, as the gap is small and it will not work to use in their trade.
The method of trading using gap
More significant can be considered the variant when the difference between the closing price of the trading week and opening price of the market after the weekend, big. Naturally, the understanding of big and small is relative, but for convenience can be considered a minor gap any gap that we could not still use in my trading and that will not affect in a significant way for us to trade.
The gap that may form during the weekend, sometimes more than 50 points, which is very essential. Traders find patterns in the occurrence of such situations and create them on the basis of the method.
In Fig.1 shows that the trading week ended. After the weekend the market opened with a gap. The gap between the last price of the previous week and the first price of a new week significant. Watching such a situation, traders often resort to the same regularities, which is based on the principle of the return of the price.
It is believed that if there was a significant value gap market, the price will tend towards the endpoint, after which there is a sharp change in the situation. On the basis of logical considerations speculators that use this pattern as soon as the market opened at a price much less than the last point of the market closing, you should immediately buy the currency pair.
Market analysis of the gap
For example, we see that the price for some time was fallen down, and then took a u-turn. Nearly all trading day, the market gradually rose, as if trying to reach the point where there was a gap. Example taken is not the most beautiful and spectacular that once it became clear that nothing is 100%, there is no market. After all, the "drawdown" is still some time, there has been in this situation after the opening of the market. However, the above pattern is, and therefore, you can try to use it.
In Forex gaps are not as common as, for example, in the stock markets. The fact that Forex is a round-the-clock system that only stops on Saturday and Sunday. At the same time, the stock exchange, usually do not work nights. This means that the breaks in the quote is much more, which is the common cause of breaks on price charts. Analysis of the gap the situation is very simple, it can be done even visually without tools.
The types of gap
Normal gap. It tends to occur in the relatively stable markets in times of shortage of liquidity.
The gap in the breakdown of important level. When there are important news or price is approaching the significant price level, we can observe a sharp jerk of the price forms a gap.
Gap acceleration. Such a phenomenon may be caused by the spread of the hype around the currency pair, when dramatically increases the turnover on this trading tool.
Gap exhaustion. Observed at the end of the movement of the currency tool at high volume. Indicates imminent reversal of the market trend.
It is difficult to predict when it will gap, because it appears not after each weekend at the market days. But this is not necessary, because it is important for a speculator to see that the gap has already occurred and to take action.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 280
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