Investment Consulting

Wednesday, May 30, 2012

What Is Gap Trading?

Gaps are empty spaces between the close of one candle and the open of the next. In Forex gaps are not very common and they usually only occur at market open on Sundays. These gaps occur between a pairs close price on Friday and it’s open price on Sunday.
Stock and commodity traders have been exploiting gaps for decades. Since the stock market closes each day gaps are much more common. The concept behind gap trading is that price will always try to fill the gap. This may sound illogical but there are some logical reasons for price to fill gaps in the stock market. Generally when price gaps there is no support and resistance in the gap area. This means that price has free room to move inside the gap.

Over the past few years people have started trading Sunday evening gaps in Forex. The concept is the same, gap traders think that price will always fill a gap.


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