Profiting from the forex market gap

forex gap trading strategy uses in the forex market since long ago. Basically, forex gap trading strategy is to exploit the price difference between the today closing trading day and tomorrow starting trading day. There are two possibilities will happen which are, if the today’s price is high, then for tomorrow’s price it is called gaping up and if today’s price is low then tomorrow’s price it is called gaping down. However, if the price remains, then for that day, there is no gap at all.

To be more precise, gap is actually an empty spot on the forex trading chart when the trading is not conducting during the between of today’s closing trading day and tomorrow’s opening trading day and yet the currency price moves significantly high or low. As a result it makes the forex trading chart showing a "gap" in the common currency price movement trend. The good thing is that you can exploit it to earn big gain rapidly.

Maybe some of you will say that since the forex market is operating 24 hours a day around the world, so when and from where this gap of opening comes from. Well, in the forex market, there are lots of forex trading with different time slots, therefore there is a way to make use of it in order to gain profit.

In order to set up to trade gap in the forex market, you can create fake opening and closing time. For instance, if you usually trade every morning at 8 o'clock, then you watch carefully the forex market and find if there is any vary in trading at that particular time so that you can do gap trading. Another simple and common way to do forex gap trading in the forex market to pay no attention to the weekends as there is not much volume in trading and get ready to trade on Monday.

Essentially, there are four forex trading gap stages which are; continuation gaps, breakaway gaps, common gaps as well as exhaustion gaps. For breakaway gap, this is a gap that occurs when the price movement trend ends and displays a new price movement trend that just starting.

The best time and in order to make the most of the analysis and trading of gap occurs at the beginning of a trading week. The forex trading platforms usually closed on Friday at 5 pm and opened on Sunday at 5 pm. Some commercial banks may even begin their trades 3 or 4 hours prior to that, and this situation may lead to the price differences or gap for the currency when the trading platforms open for business. In addition, a huge buy or sell order positions can lead to an immediate and significant price movement trend which is a gap and you can take advantage of this situation.

Most often, within 4 to 8 hours, these gaps can be filled. So, if the price difference of gap is at low price, you can place a buy order trade position and keep it, up to when the currency price fills the vacant point. However, we do not recommend that you just simply make a random buy point, instead you should watch for short period time of turnaround indicators on 5 minutes or 15 minutes charts. In addition, you should buy a point which is almost 2 / 3 of the gap. Let say, if the EUR / USD closed at 1.5700 on Friday and opened at 1.5500 on Sunday, you should not try to get in all the pips, instead you can buy for a price at about 1.5600 which can turns to better and profitable trade.

Another way to make money with forex gap trading strategy is by fading the gap where as soon as the gap is filled up, you can start trading in the other way around of the currency price movement. As of the EUR / USD example above, you should attempt to place a short position when the price goes inside the gap and again you should only sell 2 / 3 of the gap price which is around 1.5600 or approximately. You can apply this fading the gap strategy prior to the gap being filled up and the price is at low that time.

Others extra principles which are beneficial is that you are not encouraged to trade gap when there is only little difference in price movement like just under 20 pips. You should watch out for a price difference which is 40 pips or more. However, this varies from one currency to another. And also fading the gap is no more available if the gaps can’t be filled within 24 hours. You also must verify about the reality of the gaps by referring to more than one trading platforms. Upon verification with a few others chart, only then you have bigger opportunities to make profit with this strategy. Once it is confirmed in another server mapping, the chances of success are much greater.

In general, most traders believe that the forex market is operated 24 hours a day, thus the real prices of opening or closing is not exist which makes this forex gap trading strategy being abandoned by them. However, there are still some traders who continue implementing this strategy and manage to make almost 85% successful trades and make nice amount of money.