How to make money trading on gaps

Gaps in forex are as common as on the other financial markets. Beginners cannot understand what has happened to the price and why it conducts itself in quite a strange way after the position has been left open and a trader has gone to enjoy weekend relaxation. Forex gap trading strategy is sufficient enough, but it is important to understand what gap trading is about and how gaps emerge.

Forex gap trading strategy is sufficient enough, but it is important to understand what gap trading is about and how gaps emerge.

Let’s see what is gap. It can be called ‘white space’ in the chart, or a break that appears due to difference between prices: previous closing price and opening price of the next candle. If you take a look at a line chart, the gap will be represented as a prominent vertical line on it. As it was mentioned before, gaps in forex originate for the reason that Friday and Monday prices differ.

However, to be able to make money on a jump in prices, it is necessary to take certain factors into account.

How to make money on forex gap trading and is it possible at all?

This is apparently an interesting strategy, because this phenomenon as such occurs due to incessant work of the currency market regardless of the traders’ days off. On Monday the market opens at the most marketable price. Gap trading strategy implies the following basic idea: a gap may arise in the course of speculative activities and high volatility; thus, if you open a position in the opposite direction, it is likely (and the probability is high), that it will earn profit within the next few days. However, to be able to make money on a jump in prices, it is necessary to take certain factors into account.

Considerations on gap earnings:

Trading principles

Give preference to highly volatile currency pairs. The best option is GBP/JPY pair, which is recommended by many traders using this strategy. However, other options will do as well; you can choose any with JPY. Besides, you can apply this strategy simultaneously on multiple pairs. At the beginning of the week you have to figure out if there is a gap or not. The minimum gap value that suits your needs should exceed the value of an average spread for the chosen pair at least five times. If it does not, this is not a real signal.

Related Columns

The Worlds three Most Successful Forex Traders Ever

Whether you are new to trading Forex or an old hand at the currency markets, you are likely to share one key aspiration. One way to improve is to learn by example and to look at some of the most successful Forex traders in the world. In this article, you will learn about what the top Forex traders in the world have in common and how those strengths helped them to make huge profits. While you may have read about the statistics thrown around; suggesting that the ratio of successful Forex traders to unsuccessful ones is small. There are at least a couple of reasons...

The Pound Tumbles in delayed reaction

The Pound Tumbles in Delayed Reaction, as May gets Green Light from Parliament to Trigger Article 50. This has, so far, been a mixed week of good and bad news for Theresa May. The good news was that on Monday of this week she received the green light from parliament to trigger Article 50. The bad news was, however, very bad news indeed, after Scottish First Minister Nicola Sturgeon signalled the start of a legal process for an independence referendum. This quickly resulted in the pound tumbling against all of its Group-of-10 peer currencies...


Forex Awards live updates from iFX EXPO Asia 2017

Here today at iFX EXPO Asia 2017, taking place in Hong Kong, FX industry experts are gathered to answer burning questions. How to market electronic brokerage and succeed in China? What are the hottest trends in todays Forex trading when it comes to technology? How to deal with new regulatory demands imposed on forex brokers? What new opportunities does MetaTrader 5 give to FX business operation? These and many other hottest issues are now being discussed by forex industry professionals at the Hong Kong Exhibition...

Will 2017 be the Beginning of the End of the EU?

The UK is not going to leave the European Union. Of course, not. We are inextricably wound up with Europe. In terms of culture, history and geography, we are a European nation. Nick Clegg, British Liberal Democrat politician - 2010 to 2015 in the David Cameron coalition ministry. A special report on the current state of the EU and what could be in store, for the EU in 2017 - post Brexit and Trump and the rise of the EU populist movements, by Victor Romain, for Invest Ratings....


A Roundup of the Main Business News Headlines of 2016

Our moral economy went bankrupt long before our financial one. - Steve Maraboli, Unapologetically You: Reflections on Life and the Human Experience. A lot of crazy things have happened this year and I believe that I could be right in saying that many years down the road from now - many people are going to be talking about 2016. The history books will surely be looking back at 2016 in awe. This year also saw in some of the most surprising and, at the same time disruptive and seismic changes in the world of politics...

Warren Buffet backs low cost funds

EFTS - Exchange Traded Funds are quickly becoming the darlings of the financial world and are, in fact, even coming to dominate it. What used to be a relatively niche sector, is now rapidly becoming one of the biggest games in town - they now even have Warren Buffet blessing and seal of approval. Trading in Apple shares is worth over 3 billion pounds a day. However, that pales into insignificance with the 14 billion pounds, which is traded daily in the shares of State Street SPDR 500 fund. Today, the buying and selling of ETF accounts for almost 90%...