This weekend, the GBP cross currency pairs opened with an extraordinary big gaps. August 26, at Btw if you closed your AUDJPY trade at the open instead at the close as you probably did you would have a much better exit.
What Is a Price Gap?
You can adjust the percentage higher or lower to fit your risk tolerance. Wait for the Tokyo market to open at 7 p. For example, if the market at opening gaps up at Keep the trade open until the gap is filled or if the currency chart indicates the gap will continue to widen.
She received a bachelor's degree in business administration from the University of South Florida. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. These returns cover a period from and were examined and attested by Baker Tilly, an independent accounting firm.
Visit performance for information about the performance numbers displayed above. Skip to main content. Step 1 Go online to your Forex trading account or open an account if you do not have one.
Step 2 Pull up the closing price for 5 p. Step 3 Decide how large the gap must be before you will enter a trade. Step 4 Wait for the Tokyo market to open at 7 p. Items you will need Online Forex trading account.
Tip Use additional chart indicators to help determine if you should keep the trade open past the initial gap filling or close out the trade. There is an important question regarding the weekend gaps. Let me explain a little more what I mean by this question. If we hold our positions and pending orders during the weekend, and then the market opens with a gap either down or up , what will happen to our pending orders? Will they be triggered exactly where they are set, or they will be triggered where the market opens on Sunday afternoon?
Here I have explained that the currency market is closed only to retail traders during the weekend, but it is always open 24 hours per day and 7 days per week.
That is why we see a gap on our charts, when the market opens on Sunday afternoon EST. If the markets was also open to us during the weekend, then instead of the gaps, we would have candlesticks on our charts.
But this is not what we see on the platform when it becomes updated on Sunday afternoon. But it is what it is. This is what everybody may think, if he reads the above bad news. If we hold our positions during the weekend, and the market opens with a big gap against our position, then our loss will be much bigger than our stop loss. I showed you two examples at the beginning of this article, and you saw that the huge gaps we had this weekend, not only did not make any problems for us, but also made a lot more profit, because our positions were at the right direction.
This is because of nothing, but taking the positions based on the strong setups. I wrote such a long story to emphasize on the importance of following of the strong setups and ignoring the weak and questionable ones. So pending orders will not be any problems.
What if the market opens with huge gap against us, even if our position is taken based on a very strong setup? Everything is possible in this market and business.
It is possible that the market opens with a huge gap against you, even when your position is taken based on the strongest trade setup ever.
You can lose a lot. However, there are a few things you have to consider:. Thanks Chris… a very good analysis on gaps and candlestick pattern. Your articles are really helpful especially in the CS because I also like CS analysis Hope can go along with the trend this coming month. First, let me compliment you on the way you are running this site. I find it to be the most educational site I have seen on internet.
It would be a shame if you decide to quit. Regarding weekend gaps in I must admit that I strongly disagree with you. I think that it is a very profitable and high probability set up if it is outside bollinger band that can be used to close open positions as well as to trade countertrend. It is true that you do not have levels to put stops but you can use AT R in such cases. Btw if you closed your AUDJPY trade at the open instead at the close as you probably did you would have a much better exit.
This is really great that you are a gap trader also and you are very happy with it. I would be so thankful and glad if you could write a small article about your system and share it with the LuckScout followers.
I will be your first reader, because I have really interested in what you said. Hi Chris I can write an article but you must let me know if Word as a program is good enough and since I have never written anything longer then short letter I am not sure if I will know how to put any pictures. So, in order to write an article I shall need your help. Thank you for your kindness. Yes, Microsoft Word is fine. Regarding the pictures, you can save the screenshot through your trading platform and attach it to the email that you will send me.
You can find it by clicking on the flag icon in the bottom task bar. An image comes into a popup. Now go to the word document and left click on it and then right click and paste — the image appears on the document. If you know how to out a text box into the document it is better to place the snip into the text box for ease of editing the document later. Your trade setups and explantions gave a good understanding for me to trade in a better way. I reduced the number of indicators that I have been using and therefore have more clarity on what to focus.
I shall remain thankful for the knowledge you are sharing. I have just joined your mailing list. The stuff I receive and read is awesome. Today I received article about weekend gaps. I am hoping after getting proper knowledge on trading correlated pairs gaps, I will trade them.
I see these gaps on 1H, 4H and daily charts. Hi chris, From what I have just read and, going by the number of pips of weekend gaps some currency pairs exhibit, do you think it would be advisable for someone with a tighter stop loss to leave his position s open during the weekend? Hey chris i tend to trade 4 hour position trade which last up to anything from 1 to 4 days. My stop loss is calculated 5 pips below major support. I am quite profitable but the problem is that i have never held trades through weekend and close them on Friday, even it means i am in loss.
But what i noticed is that most of the trades that i close on Friday tend to reach TP the following Monday or Tuesday. I am just wondering is it really risky holding trades throughout the weekend as price gaps can occurs? What is the biggest price gaps that have occurred on Sunday market opens? Swing traders sometimes hold their positions for months or even years. Regard to the question above, i am actually only trading the 4 hour chart and my trades only last between 1 to 3 days.
So is it still suitable to hold trades over the weekend? The best thing that can answer your question is that you check the weekend gaps after the positions you have taken in the past and see how the gaps have affected your positions.
Hi Chris, thanks again and again, I read this last year and reading it again now. There is soooooo much to learn from this great site. I was wondering whether you trade fridays evening or do you leave fridays because of Weekend abnormalities, e. Or is it only monday night to thursday?
I am not a day trader. I hold my positions for several days, weeks and sometimes several months. When a too strong setup forms by Friday candle, I enter the market at the end of the same day, if I see the setup on time. If not, I enter at the market open on Sunday afternoon.