For the purpouses of this analysis I decided to use a very basic system. Entry: Provided the gap is 20 pips or wider trades are entered as soon as the market opens on Sunday. Exit: As soon as target or stop is hit. For the analysis I used my main broker GFT Forex. Since the Forex market has no central exchange there is no official open or close time in Forex. This means that gaps may appear different dependant on your broker.

This could lead to different results than the ones below. Five out of the nine trade were losses. This is attributed to the win loss ration of These stats show how unreliable gap trading can be. This year we have had nine gaps, eight of those gaps have been filled and one remains unfilled.

The table below shows you the floating pip loss you would have needed to endure for each gap to close. Three of these nine trades required a floating loss of more than pips before the gap was filled. It is illogical to leave a trade open for pips in the hope of making 43 pips when the gap is filled.

One of the trades had a pips floating loss and the one that is currently has had pips. So even though most gaps are filled some require you to suffer large floating losses before being filled. However, I have only tested one pair with four months worth of data. To be definitive I would need to test at least five pairs with one year of data. I might do this in future but at the moment it is more important to address the flawed wisdom in the Forex community.

If I see a good trade I wont let an unfilled gap keep me out of the market. The statistics make it clear that gaps are not always filled quickly, so they should not impact my trading decisions. I think the prevailing wisdom about gap trading in Forex is wrong.

While it might be possible to make some profit trading gaps it is not as easy as people suggest. So next time somebody tells you that the price has gapped so you should trade the fill, tell them that gap trading is a roll of the dice.

Open main menu. Strategies Basics Strategy Forex Mastermind Funding Articles Clock Chatroom. Log in. Combine that with a valid price action strategy and the right amount of bullish or bearish momentum, and you have a winning combination.

This Post is Sponsored by Bybit! The link above is an affiliate link. Meaning, at no additional cost to you, I will earn a commission if you click through and sign up. The best way to illustrate the gap is to show it in action. Below is a daily chart of EURUSD which shows several gaps that formed over the course of three months.

Notice in the chart above, the market formed several gaps where the opening price was above or below the previous closing price. This represents a gap in the market. First things first. The Forex market never closes, not even on weekends or holidays. A common misconception among Forex traders is that the market is closed over the weekend. In fact, only Retail trading is closed on weekends. The Forex market as a currency exchange is alive and well.

At least not in the way a lot of folks like to think they do, which is that a gap is created by the market. When retail trading closes for the weekend, your broker simply denies you the retail trader the ability to trade. This is why the size of gaps will often vary from one broker to the next. To the retail trader viewing a chart after 5pm EST on Friday, it appears that the market is closed.

In reality, the market is still moving behind the scenes, producing new bid and ask prices all weekend long. When retail trading opens on Sunday, a different price from that of Friday is often shown, thus creating the gap you see on your chart. This is why smaller gaps of ten or twenty pips are far more common than gaps of fifty pips or more at the start of a new week. These are the gaps that form due to market movement during the weekend.

They represent the difference in price from 5pm EST on Friday, when retail trading closes, to Sunday at 5pm EST when retail trading resumes. With fifty-two weeks in a year, these are also the most common gaps found in the Forex market. So while they can provide confluence to an already-established level in the market, they are not the most influential compared to the next two.

These gaps occur between the closing price of one month and the opening price of the following month. As the name implies, year-open gaps form at the onset of a new year. These are the king of gaps. A year-open gap will often influence a market for years to come. In other words, it takes the market more than five trading days to fill the gap. These can be weekly, monthly or even yearly gaps.

Do keep in mind that the significant gaps occur at higher time intervals. This means that a year open gap will be more significant than a month open gap, just as a month open gap will be more significant than a weekend gap. Notice in the chart above, AUDUSD formed a large month-open gap in price, gapping down almost 50 pips. It took the market eleven trading days to fill the gap.

Whenever the Forex market opens with a large gap I get a barrage of emails about gap trading in Forex. The conventional wisdom in Forex is that gap trading is highly profitable and easy.

In this post I take a look at just how reliable and easy gap trading is. 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. 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. Every Sunday gap seen this year has been filled but one trade moved pips on the opposite direction before the gap was filled two weeks later. Another gap was filled within two days but the price move 87 pips on the opposite direction before returning to fill the gap.

I have compiled statistics in order to analyse the profitability of gap trading. To compile these statistics I needed a basic gap trading system. For the purpouses of this analysis I decided to use a very basic system. Entry: Provided the gap is 20 pips or wider trades are entered as soon as the market opens on Sunday. Exit: As soon as target or stop is hit. For the analysis I used my main broker GFT Forex.

Since the Forex market has no central exchange there is no official open or close time in Forex. This means that gaps may appear different dependant on your broker. This could lead to different results than the ones below. Five out of the nine trade were losses. This is attributed to the win loss ration of These stats show how unreliable gap trading can be.

This year we have had nine gaps, eight of those gaps have been filled and one remains unfilled. The table below shows you the floating pip loss you would have needed to endure for each gap to close. Three of these nine trades required a floating loss of more than pips before the gap was filled. It is illogical to leave a trade open for pips in the hope of making 43 pips when the gap is filled. One of the trades had a pips floating loss and the one that is currently has had pips. So even though most gaps are filled some require you to suffer large floating losses before being filled.

However, I have only tested one pair with four months worth of data. To be definitive I would need to test at least five pairs with one year of data.

I might do this in future but at the moment it is more important to address the flawed wisdom in the Forex community. If I see a good trade I wont let an unfilled gap keep me out of the market. The statistics make it clear that gaps are not always filled quickly, so they should not impact my trading decisions.

I think the prevailing wisdom about gap trading in Forex is wrong. While it might be possible to make some profit trading gaps it is not as easy as people suggest. So next time somebody tells you that the price has gapped so you should trade the fill, tell them that gap trading is a roll of the dice.

Open main menu. Strategies Basics Strategy Forex Mastermind Funding Articles Clock Chatroom. Log in. Close menu. What Is Gap Trading? Does Price Always Fill The Gap? So even though gaps are almost always filled trading gaps in not always viable. A Closer Look at Gap Trading I have compiled statistics in order to analyse the profitability of gap trading.

The System To compile these statistics I needed a basic gap trading system. Broker For the analysis I used my main broker GFT Forex. Date Gap Close Open Target Max Float 22 1. Is Gap Trading In Forex Profitable? GAPS ARE NOT ALWAYS FILLED QUICKLY!

These can be set, as usual, in the Designer dialog. This notion is quite popular among forex gap traders. In fact They can be extremely profitable and provide precise entry levels. Home Choose a broker Best Forex Brokers Learn trading Affiliate Contact About us. The beginning of a new year is the perfect time to talk about Forex gaps.

Categories:

• Forex
• Binary Options online
• Binary Options
• Forex Bitcoin
• Forex Brokers