In this article, We learn about “Gap “.Let’s Go!
A Gap is an area on a chart where the price of a currency pair rises or falls sharply, with little to no trading in between.
Therefore, a bar or candlestick chart shows a “gap” in a normal price pattern.
Gaps often appear unexpectedly when the perceived exchange rate between two currencies changes due to underlying fundamental or technical factors.
Gaps do occur in the Forex market, but they are much rarer than in other markets because currencies trade 24 hours a day, 5 days a week.
However, gaps can occur when economic data releases surprise the market, or when trading resumes after a weekend or holiday.
Although the foreign exchange market is closed to speculative trading on weekends, the market remains open to central banks and related institutions.
This makes it possible for Monday morning’s opening price to be different from last Friday’s closing price, resulting in a price gap.
Monday’s opening price is different from Friday’s closing price. This difference is the gap.
If Monday’s opening price is higher than Friday’s closing price, the price “gaps up”.
If Monday’s open price is lower than Friday’s close price, the price “ gaps down “.
Gap type
Gap can be divided into four types:
- Common Gap simply represents an area where the price gapped.
Breakout Gap occurs at the end of a price pattern and marks the start of a new trend .
- Continuing Gap, also known as runaway gap, occurs in the middle of a price pattern and indicates an influx of buyers or sellers who share a belief in the future direction of prices.
- Exhaustion Gap occurs near the end of a price pattern and marks the last attempt to reach a new high or low.
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