![]() Some traders buy or sell an asset when the technical or fundamental analysis favors a gap on the following trading day. There are several ways to leverage gaps in the market to your advantage. Other markets that you will see a lot of gaps play out with is stock indices markets that have different trading hours. After trading hours earnings calls or a big announcement from a company can drive the price of an equity higher or lower, making it another big market for gap trading. ![]() In the case of the stock market they have set trading hours and sessions. During the weekends, prices of currency pairs can be exposed to dramatic movements. However, the markets are closed on weekends. In the case of Forex, the markets operate around the clock 24 hours a day during the weekdays. The best gap trading markets include the Forex, stock, and commodities markets. What are the Best Markets for Gap Trading? This means Forex will experience far less gaps other than when there is periods of extreme volatility or when reopening a new week. Some markets, like Forex trade around the clock during the week. With overnight gap trading, drastic news action such as economic data in the forex markets and earnings calls in the stock market can have large affects and shake prices dramatically. When the market is closed your money is exposed and when trading on margin you are exposed to a margin call as well. Having your trading position open with a large gap against you is a very real risk you take on when you hold trading positions whilst the market it closed. Overnight gap trading is where there is a dramatic rise or fall in the price of an asset during closed trading hours. You will need to cut your losses and not let them turn into large losing trades just like any other strategy. If you are looking to make trades aiming for the gap to fill, then you need to keep in mind that not all gaps will fill and some of them will take a very long time. Whilst most gaps will be filled quickly, some gaps will not be filled for months or even years. The problem you will have if you are making trades thinking that a gap will get filled every single time is that even if it does it can take a very long time. ![]() The simple answer to this questions is no, not all gaps get filled, however over 90% of gaps do eventually get filled. The quick influx of buyers or sellers will then result in the price of a security opening significantly higher or lower than the closing price the previous day.īased on the type of gap, it could signal either the beginning of a new trend or the reversal of a previous one. When such news spreads, there is a flood of buyers or sellers that can quickly change the price. Gaps usually occur when there is fresh news or a big announcement that leads to changes in market fundamentals during hours when markets are closed.
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