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How to Trade Gaps

Posted on Monday, 8th April 2013 @ 12:58 PM by Text Size A | A | A

A gap occurs on a chart when the closing of a Japanese candlestick is higher or lower than the opening price of the following candlestick. The Gaps may be bullish if the closing price of the candlestick is less during opening of the following candle; or bear if the closing price of the candlestick is higher at the closing of the next candle.

On Forex trading, as traded, not many gaps appear on charts. On Forex, the gaps are more frequent on weekends as the foreign exchange trading market is closed to trading for individuals from Friday evening to Sunday evening, but that it remains open in interbank. On the stock exchange, the gaps are frequent daily because market closes every day to re – open the next day. But the gaps can also appear in full day, during powerful movement of the market, with high volatility. On FX trading, it is during the new important economic that one can see the gaps in full open meeting more.

The gap provides a signal: signal to buy for a bullish gap and sell for a bearish gap signal. The Trader may consider entering Long on a bullish gap or short on a bearish gap, with order for continuation of the movement in the same sense that the gap.

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