Benefits Of Gap Trading You Should Know

Christine Evans/ November 23, 2016/ Forex/

Forex, or foreign exchange, trading is a highly popular way of making money. Due to its unforeseeable nature, many strategies are widely used as a way of determining the best time to invest and therefore the best chances of making money with the system. One method that has been used in investment markets for years is gap trading. It is still hugely popular when it comes to forex. One of the benefits of this system is that it is extremely easy to use. In short, it allows investors to take advantage of the gap in price from one day to the next.

Benefits Of Gap Trading You Should Know

Preset price before closure

For example, the price will be set at a certain level at the time the market closes, and this price may either remain the same or be higher or lower by the time the market opens the next day. Forex gap trading strategies have been used to great success for many. Though there is always a risk when it comes to forex trading, knowing the gaps and knowing to use this information to your advantage really can help you to increase your profits quicker than you normally would.

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Better than traditional trading

However, forex differs from traditional markets because there is no market open and closure – forex effectively trades for 24 hours a day. However, many still insist that there is money to be made with forex gap trading strategy.

“Spread” is the specialty of forex.

This means the transaction cost is incorporated in the price. In other words, Spread is the gap between the buying price and the selling price.
FX gives you high liquidity. It means you can shift a substantial number of dollars in and out of foreign currency with the least price movement.

Zero restrictions

Here are zero restrictions in FX market for directional trading. You can easily buy a currency pair (or go long) if you sense its value will increase and can sell it (or go short) if you sense its value will decrease.

You can use leverage for forex trading.

Leverage means trading more than what is in your account. For example, leverage of 30:1 means you can trade $30 in this market for every $1 present in your account. To be more precise, you can control a trade of $30,000 with just $1000 capital.

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Conclusion

When using gap strategies, you will come across ‘gapping up’ – when the opening level is higher than yesterday’s closing level – or ‘gapping down’ when the opening level is lower than the previous day’s closing level. If the price is the same, then there was no gap.

About Christine Evans

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