The market strives to close the gap
We offer to our readers another strategy to use while trading financial markets. Trading the Gap binary options strategy as well as many others, which we have already published here appertain to the advanced trading strategies.
To perform successful Trading the Gap strategy you have to follow close economic calendar and price movements on important economic events.
It does not use any indicators and the trading signal occurs exclusively in the situation on the chart. Below we are going to look in details at the description, as well as the opportunities to open trades.
What is a price gap?
In the first place, in order to understand the essence of how this strategy works, it is necessary to make decision on such a concept as the gap. It is the price gap on the chart that may sometimes appear.
Most often it is visible either after holidays, or at the time of important events release. This price gap in most cases is clearly visible, but we should remember that it can only be observed on the candlestick or bar charts.
Why does the gap appear on the chart?
For example, there is some kind of unexpected news or rumor, and the market reacts to it on Monday by the advent of the price gap. The main secret of this strategy is that the market always strives to close the gap.
How to locate a price gap?
Let's turn to the chart. The gap is quite visible but we have specifically noted it for further clarity. As can be seen, the price has grown up after the gap appearance, but it quickly returned and completely blocked the gap.
This is a result of the fact that the price is always striving to handle this situation. Trading the Gap binary option strategy has a small flaw. Closing the gap can occur immediately after it appears in just a few days.
This binary options strategy helps to get trading signals directly from the price chart. You do not need to delve into the details of technical analysis or study any indication. They are just not there. On a completely pure chart, you just need to notice the price gap.
How to open a position when the gap appears on the chart?
It is necessary to wait until the price gap unfolds and then open a trade in the opposite direction from the direction of the gap. On our chart the gap is upward. What should we do in this situation? As can be seen a few candles reversal appears.
Its signal is greatly enhanced due to the fact that the price of a financial instrument will close the price gap.
In this situation, when a reversal of candlestick pattern occurs, you can buy a Put option.
The same applies to situations where the price gap comes down.
Trader should wait for the appearance of a candle on the chart, which would indicate that the market is ready to reverse up and buy a Call option.
As the charts show, we do not use any indicators in order to get trading signals. It's really a very simple strategy and it does not require any deep knowledge of technical analysis. Everything is very clear and visible on the chart.
On the other side you need to be very experienced in fundamental analysis to easy locate price gaps on important economic events.