Gaps are the difference between quotes on different days. Usually, we are talking about the end of the trading day on Friday and the beginning of the trading day on Monday.
If this difference is significant, then a gap occurs.
Why do these situations arise?
Gaps occur when the market is inactive. A large number of orders are accumulating. As soon as the market opens, orders are executed and a gap is formed.
However, they do not always appear. Gaps are typical for situations where orders of one type significantly outweigh orders of another type (for example, buy orders are 60% more than sell orders). Usually, they try to close gaps as soon as possible.
So how to trade the gaps?
It seems to many that the best strategy is to trade towards the closing and that's it. Super-profits are guaranteed.
In fact, trading gaps is somewhat more difficult. First of all, not all currency pairs perform well during such situations.
Moreover, many people neglect stop-losses. This is one of the critical mistakes, because before closing the gap, the price often reverses in the opposite direction.
Important: to determine the most suitable currency pairs using technical analysis.
The trading algorithm is as follows:
- Determine if there is a gap
- Choose the best currency pair
- Determine the first bullish and the first bearish candle
- Enter a trade position quickly
- Place stop losses
- Start trading
Gaps are rare and occur at most once every several weeks, and sometimes even several months. However, they are a very good way to get extra profit.
Using the Cryptology exchange, you can easily trade at the gaps, and thanks to the large leverage, you can earn more than on other exchanges.