Gap Trading Strategy Rules-How To Trade Gaps
1. You need to choose a currency pair with a high level of volatility. btcusd is a good example but any currency pair that forms a weekend gap should also be good.
2. When the trading day starts on Monday, look to see if there is a gab. Make sure that the gap is at least 5 times the average spread for the pair. For example, if the spread is 3 pips, make sure that the gap is 15 pips or above. Anything less would be considered irreverent
3. If you see that Monday’s candlestick open is below the Friday’s close then the forex gap is negative and you should open a Long position at market price.
4. If you see Monday’s open is above the Friday’s close the forex gap is positive and you should open a Short position at market price.
5. You can apply two stop loss options: (a) apply no stop loss at all INITIALLY but as price moves in favor by say 50 pips, place stop loss above high or low of the Monday Candlestick when it closes (b) Place stop loss above/below nearest swing high/swing low the you can find in 1hr timeframe or 4 hour timeframe.
6. Just 5 minutes before the market closes on Saturday, (e.g., 5 minutes before the end) you need to close your trade.
1. You need to choose a currency pair with a high level of volatility. btcusd is a good example but any currency pair that forms a weekend gap should also be good.
2. When the trading day starts on Monday, look to see if there is a gab. Make sure that the gap is at least 5 times the average spread for the pair. For example, if the spread is 3 pips, make sure that the gap is 15 pips or above. Anything less would be considered irreverent
3. If you see that Monday’s candlestick open is below the Friday’s close then the forex gap is negative and you should open a Long position at market price.
4. If you see Monday’s open is above the Friday’s close the forex gap is positive and you should open a Short position at market price.
5. You can apply two stop loss options: (a) apply no stop loss at all INITIALLY but as price moves in favor by say 50 pips, place stop loss above high or low of the Monday Candlestick when it closes (b) Place stop loss above/below nearest swing high/swing low the you can find in 1hr timeframe or 4 hour timeframe.
6. Just 5 minutes before the market closes on Saturday, (e.g., 5 minutes before the end) you need to close your trade.
