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What is gap and how to take opportunities on it?


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We witnessed at the market opening on Monday at the beginning of this week that there was a gap in the USDJPY pair and several other pains that had elements of the JPY currency including EURJPY and CHFJPY. The gap will be very visible from low timeframes such as M5 or M15.

The gap can be recognized from the gap between one candlestick and the next candle which are not connected to each other, it is as if no trading is taking place where there is a distance between the close price and the open price of one candle to the next candle.

There are 4 types of gaps according to the article on the FXOpen blog, namely Exhaustion, Breakaway, Continuation, and Common.
Gaps can occur both in the forex market and the cryptocurrency market, even in the stock market. Even in the stock market, gaps occur more often than in the forex market.

Taking advantage of gap opportunities to gain profits in forex trading

Some traders may try to take advantage of trading opportunities when a gap occurs. There are several gap trading strategies such as Gap and go trading strategy, Quick reveal gap trading strategy, and Small gap fill trading strategy.


In the gap-and-go strategy, traders take advantage of momentum after a sudden market spike occurs. This strategy is used by traders when a gap occurs in the direction of the trend.
This quick reversal gap trading strategy takes advantage of the gap that occurs when a spike in the gap occurs against the trend, this gap often reflects a reversal.
Small Gap Fill Trading Strategy, this strategy takes advantage of small gaps in the range of less than half of the previous day's trading which are filled in a short time.

Profitability of gap trading strategies

Understanding gaps can provide trading opportunities with fairly high profits. However, traders need to mitigate risk by placing stop losses and rational profit targets. It may take a long time for trial trading to find accurate settings.
A market that moves dynamically is one of the external factors that is sometimes unpredictable and has its own impact on the psychology of traders.

Conclusion

There are many types of trading strategies in forex trading, including looking for opportunities when there is a gap in the market. This is just one of many trading strategies that may be combined with other strategies. To better understand how to trade with gap, you can read more at FXOpen blog
 

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In forex trading, a gap occurs when there is a significant difference between the closing price of one candlestick and the opening price of the next candlestick. I rarely experience gaps trading with HFM, probably because I stay away from trading when market is too volatile. Traders often look for opportunities to trade gaps by entering positions in the direction of the gap, anticipating a continuation or a fill of the gap. However, it's essential to consider factors like market context, volatility, and risk management when trading gaps.

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