Utilizing Gap When Market Opens In Early Week
Gaps that often occur early in the week to make many traders avoid to hold positions during the weekend when the market closed. In fact, the gap can be used as trading opportunities.
As a trader, you would have seen a Gap , or a wide gap between candlesticks on Candlestick Chart, until it seemed as though prices suddenly plummeted or suddenly surged without any transactions taking place between the formation of one candle to the next candle. Conditions that often make traders wonder, what happened? Can I use it for trading? This time I will discuss about how to take advantage of the usual Gap occurs when the market opens at the beginning of the week .
Background The emergence of Gap In Early Week
As we know in terms of forex trading time , Forex Market closed during the weekend, precisely on Saturday at 04.00 pm, then reopened on Monday at 04.00 pm. On the other hand, factors affecting the value of a country’s currency, such as the political economy of the country concerned, are ongoing, because in general human activity continues. That is why, it is possible at the beginning of the market open early in the week, a gap or price jumping, either up or down and the last price when the market closes.
The gap that often occurs earlier this week makes many traders avoid holding positions, or leave trades open for the weekend when the market closes. It makes sense indeed, because when the market closes, we will not be able to do anything about our open position. Yet all possibilities could happen.
Extreme, the political and economic conditions of a country may change drastically over the weekend, which makes the value of the currency could change drastically without we can do anything, because the market is closed.
How to Utilize Gap In Early Week
This gap can indeed be a nightmare for traders whose position touched Stop Loss (SL) when the market opens at the beginning of the week. However, it could also be an opportunity for us who want to take advantage of the Gap. Utilizing the Gap at the beginning of the week, the principle is almost the same as when we will take advantage of the fast movement during the news release as we discussed earlier .
Let’s examine the GBP / USD chart at the following 15 Minute timeframes (M15):
If the price on Saturday at 03:58 is 1.5620, then we put a pending order in the form of buy stop 10 pips above it , that is at 1.5630 with Target Profit (TP) about 20 pips at 1.5650. Also post a pending order in the form of sell stop approximately 10 pips below the price ahead of the close market, which is at 1.5610 with Profit Target around 20 pips at 1.5590.
Shortly after market open on Monday at 04.00 pm, check the position of the pending order . Cancel pending order untouched. In the above example, the canceled is the sell stop . Thus, we have gained about 20 pips when the market opens. Easy, is not it !?
However, this way is not without flaws. The downside of this way is, we have to “sacrifice” to sleep late and get up early, in order to capture moments just before the market closes and shortly after the market opens.
Okay, the above is just an example if we want to take advantage of the Gap that occurred at the beginning of the week. The choice is entirely in your hands, whether to avoid the Gap by closing all positions at the weekend, or instead use the Gap to deliberately install the position just before the market closes. There is no harm in avoiding the market, because there are just traders who consider the market on the weekend as one of the most dangerous forex trading time .However, there is nothing wrong with trying to make use of it.