Money Exchange with Gaps Forex Trading
It is a price pattern which can offer information regarding the direction of the price and the strength of the market. Gaps that appear on a chart are pretty important price pattern to understand market direction. It is very popular strategy with money exchange market. Forex trading closes on Friday afternoon and does not reopen until Sunday evening.
Forex investors trade the weekend gap by expecting Sunday’s opening price to return to Friday’s closing price. there are Four types gaps.
1- Common gaps with Money Exchange
They are usually appear inside a price pattern and they are easily covered (Head and Shoulders, Rectangle, Triangle, etc.).
2- Breakaway gaps with Money Exchange
These gaps appear when the price breaks from a price pattern or above/under important levels and shows that the market is ready to continue the move and they are not that easy to be covered.
3-Runaway gaps with Money Exchange
These are continuation patterns just like Flags and Pennants and are they are very hard to cover because of the strength and determination of the market to move forward.
4-Exhaustion gaps with Money Exchange
They are announcing that the market has reached a limit and the current move might be reversed soon and this is why it is easier for this gap to be covered.
When a gap appears a trader should look for other technical elements that will tell him what kind of gap it is. If he managed to determine if it is a common, breakaway, runaway or exhaustion gap, then he should wait for another candle to be drawn and he will be able to know the direction of money exchange market.
Each trader has a unique perspective of market movement and a different view on how a certain move must be traded. As we said, some traders will buy the breakout as soon as it occurs, while others will fade it when a new swing high is reached.
Others will wait for the gap to be filled and enter in the original direction as the previous support/resistance zone switches roles. We will turn our attention toward the latter strategy.