Gap Trading

[arco]

Seeing all these amazing gaps today, it made me think there must be some mileage in trading them.......the rules state all gaps are eventually filled.........although I'm sure there must be exceptions to that rule.




What is a Gap?
A gap is a change in price levels between the close and open of two consecutive days. Although most technical analysis manuals define the four types of gap patterns as Common, Breakaway, Continuation and Exhaustion, those labels are applied after the chart pattern is established. That is, the difference between any one type of gap from another is only distinguishable after the stock continues up or down in some fashion. Although those classifications are useful for a longer-term understanding of how a particular instrument reacts, they offer little guidance for trading.

So now we need to define some rules to trade the gaps.

Any ideas or thoughts?

[arco]

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Here's a starter chart - lets see what happens here.

Filling the gap alone would net 217 pips, but if we can get the reversal down to the bottom of the gap ----- BINGO

Last weeks gap of 70 pips was small by comparison.....will it get filled?

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Gap 001.jpg

[arco]

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Result of the potential gap trade mentioned yesterday - a maximum of 710 pips

(Last weeks gap appeared to act as resistance).

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[arco]

309 pips opening gap on Gbp.Jpy.

We may be able to get some mileage out of this once the dust settles.

Seeing these gaps again makes me think ALL positions should be closed on Friday nights...........stops may just not save your bacon in this environment.

[dumbass]

what a great way to wake up though if you picked the right direction.

ive never seen anything like it , last few weeks .

ive never really worried about holding over the weekend but i think your right that all possies should be closed.

[AMR]

what a great way to wake up though if you picked the right direction.

ive never seen anything like it , last few weeks .

ive never really worried about holding over the weekend but i think your right that all possies should be closed.

Yes with the fed now doing business and making major announcements on Sundays holding over the weekend is quite horrible. Lost 260 odd pips on the EUR/JPY long, although still up from my entry.

What do you do in such as case? Hold onto the trade and wait for the gap to potentially fade? Or get out and re-assess?

[arco]

AMR

In this environment my ideal plan is to close off everything on Friday (or very early Sat AM) and re-position on Monday/Tuesday. Its the only safe way IMO.

You may just get lucky, but like your EY trade .....you may be in serious trouble (and more so if holding a large position).

arco

[Dr_Who]

After my first foray into FX and losing a few grand, I am abit shy to go back. Have to give me a few weeks to sink in before I tip my toes in it again.

[arco]

OK .....now dont tell everyone........

Heres the secret.....

.......whatever you decide is right to do...

.........do exactly the opposite.

Now you get 95% winners and only 5% losers.

Why didn't I think of that earlier

So Simple

[arco]

Here's a GAP (window)

Will it be closed