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Gap up and gap down strategy

Gap up and gap down strategy : It is the difference between two consecutive candles closing price and opening price called the gap. A gap will occur when the price skips between two trading periods skipping certain prices. The gap creates a void on a price chart as the price gap is the areas on the chart where there is no trading. The Gaps are the greatest imbalance between demand and supply. A gap up occurs because of aggressiveness by buyers as there are more buy orders at open. The gap down occurs when aggressiveness is present by the sellers. The gaps are always a price level where there is supply and demand imbalance at the open. The gap-fill refers to the price retrace and closes the level where the origin of the gap occurs. The closure rate for the up gap will increase if the prior day’s open to close price trend up. The closure rate for down gaps increases if the prior day’s open to close move goes downward. After filling the gap price another occurrence with a gap is occurred once gaps are filled by price.

Exhaustion Gap

There is a weak gap-up to resistance or gap down to support. The price action is designed to trap you from a potentially weak market into a poor trade catching stop-losses on the short side. The upward gap quickly fades and prices turn lower. So when the prices close under that last gap it is a dead giveaway.

Professional gap

The gap appears at the beginning of the moves. It occurs in the supply zone when the price approaching the quality supply and demand zone

Inside gap

They have two gaps as week market gap up and Strong market gap down. The low volume warns you of a trap up-move after a gap up resistance

Criteria

1) The Price gap up should be above the previous day high
2) Then wait for the first candle to complete
3) The Volume should be high and supporting in the direction of the gap
4) We Mark opening range
5) Entry on breakout of high of the day
6) Price should above swap

Pros and cons

This strategy is used on the stocks. They are common in these markets due to the fact that they operate during fixed hours. Price opening after a holiday period can result in gaps. The frequency of trades using this strategy is not high in the forex markets.

Trading

The entry strategy is based on technical analysis while news causes the move based on fundamental news. So all those strategies should be traded during the first 30 to 60 minutes of the regular trading hours. In case you want to trade with markets you should analyze the typical price movement’s first. It is to evaluate if the strategy can be applied. The day trading stock with the gap and go strategy is possible if volume around the market opens high enough to place your trade.

Conclusion

In the conclusion of the gap and go strategy it is a simple trading system that is used in the appropriate markets. They will allow traders to build an automated trading solution which is based on the conditions. The strategy can be used for intraday scalpers but it can also be extended to short-term swing trading.