Disruptions in stock stratégies Forex are known as gaps. Gaps occur because of underlying fundamental or technical factors.
For example, if a company’s earnings are much higher than expected, the company’s stock may gap up the next day. Breakaway gaps occur at the end of a price pattern and signal the beginning of a new trend. Exhaustion gaps occur near the end of a price pattern and signal a final attempt to hit new highs or lows. Continuation gaps occur in the middle of a price pattern and signal a rush of buyers or sellers who share a common belief in the underlying stock’s future direction. When someone says a gap has been filled, that means the price has moved back to the original pre-gap level. Technical resistance: When a price moves up or down sharply, it doesn’t leave behind any support or resistance.
Price Pattern: Price patterns are used to classify gaps and can tell you if a gap will be filled or not. When gaps are filled within the same trading day on which they occur, this is referred to as fading. There are many ways to take advantage of these gaps, with a few strategies more popular than others. Some traders will buy when fundamental or technical factors favor a gap on the next trading day. Once a stock has started to fill the gap, it will rarely stop, because there is often no immediate support or resistance.
Be sure to watch the volume. High volume should be present in breakaway gaps, while low volume should occur in exhaustion gaps. To tie these ideas together, let’s look at a basic gap trading system developed for the forex market. The currency must gap significantly above or below a key resistance level on the 30-minute charts. The price must retrace to the original resistance level.
This will indicate the gap has been filled, and the price has returned to prior resistance turned support. There must be a candle signifying a continuation of the price in the direction of the gap. This will help ensure the support will remain intact. These large candles often occur because of the release of a report causing sharp price movements with little to no liquidity.