Weekend Gaps

Discussion in 'General Forex Discussion' started by angelnish, Sep 5, 2012.

  1. angelnish

    angelnish Banned

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    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?
     
  2. Enivid

    Enivid Administrator Staff Member

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    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.
     
  3. ezrydn

    ezrydn Active Trader

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    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.
     
  4. WalkieTalkie

    WalkieTalkie Master Trader

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    Lucky you! I once lost about $300 in gaps
     
  5. ezrydn

    ezrydn Active Trader

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    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.
     
  6. ezrydn

    ezrydn Active Trader

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    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?

    [​IMG]

    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.
     
    Last edited: Sep 7, 2012
  7. ezrydn

    ezrydn Active Trader

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    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
     
    Last edited: Sep 7, 2012
  8. ezrydn

    ezrydn Active Trader

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    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.
     
  9. mediaad

    mediaad Trader

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    Thanks!!!!!!!!!!!!!!!!!!!!!!!!!
     
  10. Enivid

    Enivid Administrator Staff Member

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  11. optionking

    optionking Trader

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    Forex is 24/7 market, therefore, transaction also being made during weekends while broker closes the market. It results in gap during weekend.
     
  12. ezrydn

    ezrydn Active Trader

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    I've often wondered "Just how does one STOP the Fores Market in mid-stream?" While it's easy to cut the signal out, closing a market the size of Forex would seem to take longer than 48 hours.

    I love the Gap!
     
  13. Enivid

    Enivid Administrator Staff Member

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    It's all automatic and instantaneous - liquidity providers and clearing houses just stop executing orders and providing quotes.
     
  14. ezrydn

    ezrydn Active Trader

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    Checking my two indicators above this morning is showing good GAP possibilities with USD/CAD. The Currency Index is currently showing CAD at +2 bars of strength and USD at -8 bars of weakness. Therefore, I'll SELL weakness.

    The SELL order is verified by Trend Scanner which shows the D1-USD/CAD intersection as RED, a downtrend.

    I'll check again to verify just before loss of signal and order entry.
     
  15. Enivid

    Enivid Administrator Staff Member

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    So your position is to expect a weekend gap down on USD/CAD, right?
     
  16. ezrydn

    ezrydn Active Trader

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    That's usually the direction of sell orders, yes. But, that's beside the point now. Entry was missed at this end. Did you take it?
     
  17. Enivid

    Enivid Administrator Staff Member

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    No. Actually, I've closed my short on Friday.
     
  18. ezrydn

    ezrydn Active Trader

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    Let's see tomorrow what would have been our outcomes had we been there.
     
  19. ezrydn

    ezrydn Active Trader

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    The cross hair tool says "163" gap in USDCAD. Don't know if that's $163 or 163 pips. But it gapped the direction I predicted. Either way, free cash. We would have been 163 something richer. LOL
     
  20. Enivid

    Enivid Administrator Staff Member

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    Hmmm... My chart only shows 8.1 pip bearish gap - from 0.97109 to 0.97028. With 4-pip spread that is not very exciting.
     

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