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Forex Gap Trading: Simple and Profitable

By Andrew Daigle

Republish: EasyPublish™
Published: 07Nov2008
Word count: 402
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You can search the Internet, or go to your local library, and find a plethora of information on complicated, hard to understand, currency trading strategies. Though Forex education is important, there are many simple, time-tested Forex trading strategies that can be used immediately and give you profitable results. Profits are, as we all know, the bottom line.

Profiting from Gap Trading

Gap trading is not a new strategy. It's been used in all investment markets for a very long time. To learn this Forex trading technique is relatively easy. Gap trading in an attempt to take advantage of the difference, or "gap," in price between the close of the previous day with the open of the following day. If the open is above the previous day's close, this is commonly referred to as "gapping up." If the open is below the previous day's close, this is called "gapping down." If the open is at the exact same price, then there was no gap.

Forex Trading and Gaps

Generally, in Forex trading this strategy tends to be ignored; most people feel that as currencies are trading 24 hours a day worldwide, there is no true opening or closing prices. That being said, some people maintain that gap trading in Forex trading can be successful 85% of the time. If this is the case, there is money to be made. The question becomes: "How can you trade gaps on the Forex market?"

If you ignore the 24-hour time frame associated with Forex trading, and set up an opening and closing time to create an artificial market, you can provide yourself with an open high low close data range. Based on that data range, you would be able to trade gaps. An alternative Forex trading strategy is basically to ignore trading on Saturday and Sunday, when volume thin as most of the world is not working. Under this scenario, you establish a closing time on Friday and an opening time on Monday. Based on the gap, you take the appropriate position.

Unlike what you might think, the Forex trading strategy for gaps is contrarian by nature. That is to say, you do the opposite of what's intuitive. If the price gaps up, you sell. If the price gaps down, you buy.

This currency trading strategy works an outstanding amount of the time, and thus, it's a simple process that can produce great profits.

Andrew Daigle is the owner and author of many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and partners with Forex Confidential for live trading sessions and their very profitable forex trading signals service.

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