Forex Strategy gap

Forex Strategy gap - an interesting trading system that uses one of the most challenging phenomena of the Forex market - week break (gap) between the closing price last Friday and the opening price for her next Monday. By itself, the gap appears due to the fact that the interbank foreign exchange market continues to operate on the weekend, opening on Monday at a price with the highest level of liquidity. The proposed strategy is based on the assumption that the gap - this is the result of speculation and excessive volatility, and therefore the position open in the opposite direction, with high probability to become profitable within a few days.

Features

• Regular trade with clear rules.
• There can be no hunting for stop-loss or premature triggering stop-loss.
• Statistically proven results.
• You will have open positions at the beginning of the week and close smoothly before the end of week session.

How to trade?

1. Select a currency pair with a relatively high level of volatility. I recommend GBP / JPY, since it performed best during my test. But other couples from JPY (Japanese yen) should suffice. Incidentally, this strategy can be used simultaneously on all major currency pairs simultaneously.
2. When starting a new week, see if there is a gap. Gap must be at least 5 times the average spread for this currency pair. Otherwise, it can not be considered a real signal.
3. If the opening Monday following Friday's close, the gap is considered negative, and you have a long position.
4. If the opening is Monday, closing above Friday's, the gap is considered positive, and you should take a short position.
5. Do not place a stop loss or take profit (this is the rare case when a stop-loss is not recommended).
6. Right before the end of the week's trading session (for example, for 5 minutes before closing time), you should close the position.

Example

You can see the last 7 weeks, the pair GBP / JPY (on 24th May 2010), and all of them there are gaps. 6 of 7 gaps give the correct signals, which make a profit. The last gap gives the wrong message and makes a small loss. The average spread for GBP / JPY was 3 pips during the period shown in the image, and all gaps were much wider than 15 pips, which means that they are normal signals. The total income was 1612 points over the 7 weeks - not so bad.

Attention!

Use this strategy at your own risk. EarnForex.com not responsible for any damages that may result to you when using any strategy presented on the site. It is not recommended to use this strategy on a real account without testing it to start a demo account.