{"id":634374,"date":"2024-06-28T15:20:14","date_gmt":"2024-06-28T13:20:14","guid":{"rendered":"https:\/\/ftmo.com\/?p=634374"},"modified":"2024-06-28T15:28:45","modified_gmt":"2024-06-28T13:28:45","slug":"how-to-trade-gaps-in-the-markets","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/how-to-trade-gaps-in-the-markets\/","title":{"rendered":"How to trade gaps in the markets?"},"content":{"rendered":"
Anyone who has been trading in the financial markets for some time has probably encountered a gap. It is a situation when a large space appears between the close price of one candle and the open price of the next candle. These situations can pose an increased risk due to their unpredictability, but also present a good opportunity for a profitable trade.<\/em><\/p>\n Gaps appear on the chart as areas where no trade is occurring because there are no orders at those price levels. It simply means that no trader was willing to trade at the given prices. One could say that even those who were willing to trade found no counterparty.<\/p>\n In extreme cases, these areas can be really large and can do a lot of damage, but usually they are relatively small areas with no trades executed and traders can use them to their advantage.<\/p>\n Gaps appear quite frequently in the markets and traders need to watch out for them, especially when holding trades open over the weekend<\/a> or at times of important news announcements. Gaps are less common in forex because it is traded 24 hours a day and mainly weekend gaps are present. For stocks or commodities that have fixed trading hours, gaps may also occur between days when the markets are closed.<\/p>\n The last instance where gaps occur in the market is when important news are announced. Thus, in forex, gaps can occur at the time of macroeconomic data releases, while in equities, gaps can also occur at the time of interesting or unexpected news related to a company’s operations. Commodity markets, in turn, can be particularly vulnerable to factors such as geopolitical instability and other related issues.<\/p>\n Many traders have unpleasant experiences with gaps, especially when they occur during the trading day. It happens just when there is some surprising news in the market and if the gap manifests itself by moving the price in the opposite direction to the trader’s speculation, significant negative slippage can occur. The danger is that even if the trader has set his stop loss correctly and is not risking too much money on the trade, this slippage caused by the gap can increase his loss significantly. On the other hand, if the gap manifests itself by moving the price in the “right” direction, the trader can make more money with the positive slippage than he would have made with his original Take Profit<\/p>\n<\/a><\/p>\n
When the gaps occur<\/h2>\n