Price Gap System - Forex Strategy

The price gap system is a simple trading strategy based on the traffic momentum theory. It doesn't require reaching for stop losses nor take profit orders. They are completely unnecessary because we give our orders only at the moment of opening or closing the session. Thanks to this, the closing order is itself SL or TP depending on whether it allowed us to earn or turned out to be a loss.

How the price gap system works

The price gap system is based on very simple rules. Our task is to find an asset that:

• has a tendency to open gaps,
• the session was closed to the maximum of the fluctuation range,
• is not currently in a flattened consolidation,
• can not be too sensitive to the behavior of the broad market (for example, the appearance of unexpected information).

When we found the right instrument, we patiently wait for the session to close and we make the purchase. At the same time, we issue an order to close a position for the opening of the next session. So there is no need to insert additional stop losses or take profits. The same applies to setting levels - the market does it on our behalf.

Like any other strategy, the price gap system has several variants. For example, we can wait for the first 5 minutes of the session and only then close the position. This solution is reasonable because the first minutes of the session are often used by latecomers who hope that they will still manage to catch the moves and thus the price maxima go up. However, this modification requires a great sense of the market and complicates the system - then it is necessary to reach for SL, which should be placed just below the session opening level.

This method of trading is extremely popular in Asia. Reason? Look at the first chart again - each session starts with a gap and this gap is often the majority of all market movement. The biggest profits are also transferred there, but not only there. It is easy to apply, for example, to shares of smaller companies (even in Poland), as shown in the example below. Here we see the stock price chart Impexmetal with a tendency to create gaps.

Author Comparic.pl