Weekend Gaps

[angelnish]

What creates a weekend gap in price? And if it is a true reflection of the strength/weakness of a particular pair, why is the gap often closed?

[Enivid]

Market sentiment changes during the weekend hence the difference between Friday close and Monday open.

The gap is often closed because traders expect it to be closed often.

[ezrydn]

As you know, I make it a point to trade "The Gap" every Friday. While I missed my specific trade last weekend, I got caught with two open orders. The both gaped in the correct directions giving me $400+ profit.

I liken the Forex to a river. It's level is constantly changing throughout the week from people getting in and out. Over the 48 hour weekend, it settles or moves into equilibrium. Thus, a gap is formed.

It's just an easy way to look at it.

[WalkieTalkie]

Originally Posted by ezrydn

As you know, I make it a point to trade "The Gap" every Friday. While I missed my specific trade last weekend, I got caught with two open orders. The both gaped in the correct directions giving me $400+ profit.

I liken the Forex to a river. It's level is constantly changing throughout the week from people getting in and out. Over the 48 hour weekend, it settles or moves into equilibrium. Thus, a gap is formed.

It's just an easy way to look at it.

Lucky you! I once lost about $300 in gaps

[ezrydn]

You definitely need a proven method to Gap Trade. In my 5 months now of weekend gap trading, I haven't seen a loss yet.

[ezrydn]

Typically, everyone crys "Show me your charts." Well, as I said, I use NO chart to decide the Weekend Gap. Here's what I DO use. The Forex Currency Index in top and Trend Scanner below. I first look at FCI, specifically the Daily grouping. I consider STRENGTH against WEAKNESS or vice versa. I then verify gap direction on THAT pair in the Trend Scanner D1 showing. If TS shows no indication, or grey, I cross-check correlated pairs. That will be my Weekend Gap trade.

Now, I open the order INSIDE of 1 minute til loss of signal (LOS). Sunday, I'm at the computer to close the Gap order immediately upon acquisition of signal (AOS). Why so tight? I want the gap, not further movement, which will probably be against the gap. Easy enough?



In this scenario, I would have (did) pick EUR/AUD on a SELL order, selling more weakness over less strength.

There's the chart I use and the way I read it.

[ezrydn]

OK,

We have loss of signal. I targeted EUR/USD on a buy order. Let's see what the Gap does. The FCI is showing the EUR at 6 bars of strength and USD at 5 bars of weakness. An 11 bar spread. Therefore, I go long on strength. Is this starting to make sense to anyone? LOL

[ezrydn]

Well,

I wondered when it would happen. After 18 winning Gap trades, I get my first loss (-$50). However, the trade is still active and in in range to hit a new TP mark so I'll leave it be to do it's thing. Still, one against 18 is nothing to be sad about.

I knew it was coming. It was just a question of when. Now that it's done, I'm set.

[mediaad]

Thanks!!!!!!!!!!!!!!!!!!!!!!!!!

[Enivid]

I have posted a poll on trading the gap in Forex:

http://www.earnforex.com/blog/2012/0...in-forex-poll/

Please take some time to vote. Thanks!