FOREX TUTORIALS (MARKET GAPS )
GAPS! UNDERSTANDING THEM.
- What is Market Gap?
A gap is a sudden jump in price from one Level to the other, that no Prior Trading occurred in between.
Gaps Usually occur due to and Underlying fundamental or technical Factor, and should be well investigated. For Example, a stock could gap up or down when the market opens because of an Important Fundamental News over the closing sessions of the Market. Especially, when the Market is not Expecting such data.
A gap Up tells you that no investors were willing to sell that particular asset/currency/stock at the prices IN-BETWEEN. A Gap down Tells you that investors were not willing to buy at the prices in-between.
In the Forex Market, Gaps Usually Occur over the weekend, as it is the only Time the market closes. But Gaps are very common in the stock markets.
- TRADING GAPS.
It is True that after a Gap, Price Usually Goes Back and FILL The price in between. Causing Traders to Sell Gap ups and Buy Gap downs.
In also doing that, One Must be wary because Spreads Are Usually Very Wide during the Opening sessions of the market when Gaps Occur. One Must also take note that Gaps do not Immediately Get Filled, it can take durations from IMMEDIATELY GETTING FILLED TO MONTHS BEFORE IT GETS FILLED
- TYPES OF GAPS.
BREAKAWAY Gaps are almost similar to Runaway Gaps, They are usually found after a period of indecision in the price of a security, e,g after a consolidation or sideways movement, The direction of the Break signifies investors Sentiment.
Exhaustion Gaps Signal Reversals, They are Usually Found at the end of a trend. They signal the last blow in a market cycle. An Exhaustion gap is found at the bottom o a downtrend, and at the top of an Uptrend
Common Gaps offer No significant technical opportunities, they occur in between normal trading ranges.
Runaway Gaps are more of continuation Gaps. They are usually found in the direction of the current trend. Runaway Gaps signify investor interest in the particular Asset/currency/stock. They signal a healthy continuation of the current trend.
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By ELETU MUFTAU
Business Development Officer