The gap is Price gaps appear on financial charts. When participating in stock market trading, you will see many gaps popping up, with reputable forex brokers this usually happens in the opening session of the second week, or in one of the very special cases. so What is Gap?? How to trade with the Gap more effectively? Find out with kiemtien.com here.
The concept of GAP
Gaps can be understood as gaps, when the price suddenly rises too strongly or drops too sharply, causing the price to bounce or fall higher or lower than the closing price of the previous candle, creating a gap. on the price chart, which we usually call the Gap.
The role of the GAP
The best role of the GAP is to help Traders analyze, evaluate and execute trades in the simplest and most effective way. In addition to having the characteristics of the 5 groups of GAPs, the GAP itself also creates a support or resistance line for the stock price. Is the GAP gap phenomenon likely to be filled? Filling times vary, ie after a few trading sessions or even more. Therefore, Traders need to be careful when using GAP in transactions.
View more: What is support and resistance? How to identify potential support and resistance zones
Types of GAP on the market
There are 4 different types of GAP on the market, including:
1. Common Gap
This is the most common type, it appears mostly in the opening session of the week. Usually, the GAP fills up soon after, so it is used by many traders to trade. But this is not always the case, when trading you still need to look carefully. Also, this type of Gap isn't too far off in price and doesn't have much meaning in stock and forex trading sessions.
2. Burst Gap (Rupture Gap)
This is a type of Gap that only occurs when there is extremely unexpected or strong news, causing investors to change their mindset and shift from the current trend, causing the price to move into a new trend such as from falling to bullish or vice versa. back One point to note is that this gap is usually not filled, but it can go up or down quickly.
3. Continuation Gap
This type is more common in the stock market than in forex, when an uptrend or downtrend in stock prices is clearly established. And the Runaway Gap will act as a signal confirming that the trend will continue to run strongly.
4. Exhaust Gap (Exhaust Gap, Exhaust Gap)
Similar to the Continuation Gap, the Exhaustion Gap mainly occurs in the stock market, usually located in the upper or lower position after forming an uptrend or downtrend for a long time before, when the Exhaustion Gap appears to signal the end of a trend, so it is often called the Exhaustion Gap.
The most effective way to trade with GAP
To trade the GAP for the best effect, in addition to determining the fill period, traders need to determine whether the GAP is in some familiar pattern of resistance, support, or trading. In case the GAP coincides with the resistance levels, the price trend will come back to fill the GAP and also to check the accuracy before going up or down according to the trend.
For two common types of GAP: Exhaust GAP and Continuation GAP, the occupancy rate is very high. Therefore, Traders need to find a way to identify these types of GAPs to make the trading process easier.
View more: Forex knowledge for beginners 2022 you need to know
Note when dealing with GAP
After learning, knowing how to set up a securities account, it is the Trader's job to carry out transactions using GAP. In order to achieve the best efficiency when trading, it is necessary for Traders to understand the following important notes:
- GAP analysis combined with volume indicator, thus helping the Trader to confirm the signal correctly.
- For two groups of GAPs: Continuity GAP and Exhausted GAP generally signal that the price moves in 2 different directions. Therefore, it is necessary to learn carefully to avoid confusion and “lock-in” of these two types of GAP.
- Then it is necessary to accurately determine the support or resistance levels as per the GAP forms to proceed with the proper order.
- GAPs are not always filled and are usually filled at different intervals. Therefore, when the GAP appears, it is not immediately open for buy or sell orders as this will negatively affect investors' accounts.
Gap GAP is considered an important technical indicator on the candlestick chart, helping traders make more accurate and effective buy and sell decisions and find areas of support and resistance. Across the gap, the GAP helps traders make effective disbursement and profit-taking decisions. However, the GAP is not a great tool, it is just probabilistic, it is necessary to combine other technical analysis indicators like MA, RSI, MACD… to increase the probability of winning more. Above is content related to the Gap and how to trade the Gap effectively. I hope the article helps you understand the Gap better so you can trade more easily. Don't forget to regularly monitor Forex signals to get the best free Forex signals.
View more: What is an indicator? What kind of indicator is most effective in Forex trading