Recognize Forex Gap To Avoid Losses
Have you ever lost money because of a price jump or a Gap? Yes, it usually happens when the turn of the day or the turn of the week. In stock index trading, which has the time or opening hours of the exchange, a gap can occur at the turn of the day. While in forex trading, gap can occur at the turn of the week. Or a price gap can also happen when there is fundamental news that is very impact on the market.
The word gap is the price difference between the previous candle closure and the current candle opening. Usually, the trader believes that price movement after the gap occurs is covering the width of the gap. Sometimes it is true to cover the difference gap but must also watch out for the price does not cover the difference gap and even continue the gap that occurred.
For trading purposes, the gap can be defined into 2 major types:
Full Gap, which is the price difference that occurs when the open candle level is currently outside the previous candle range (high-low). This type of full gap can still be divided into two, namely full top gap and full bottom gap.
Full Top Gap occurs when the open level is currently above the previous high candle level.
Full Gap Down occurs when the open level is currently below the previous low candle level.
Partial Gap, the price difference that occurs when the current open candle level is still within the previous candle range (high-low). Likewise with this type of partial gap is still divided into two, namely the upper partial gap and the lower partial gap.
The Partial Gap Up occurs when the open level is currently between the close and the previous high candle level.
The Lower Partial Gap occurs when the open level is currently between the close and the previous low candle level.
You should pay attention to price movements when a gap occurs. In order not to get stuck in the habit of “definitely close the gap”. Especially the pressure that occurs in the market or the ongoing sentiment.
The occurrence of the gap is not without reason. Generally, there is important data or fundamental news occurring on Saturdays and Sundays. So there was a gap on Monday. If the bullish sentiment caused by the news still dominates the market, then the full or partial gap may continue to be bullish. Vice versa, if bearish sentiment from fundamental news dominates the market, then the full or partial bottom gap could continue bearish.