Gaps in forex trading are like little surprises that pop up on your charts. Imagine you're looking at a price chart, and suddenly, there's a space between the closing price of one candlestick and the opening price of the next. That's a gap. These gaps typically happen when the forex market closes for the weekend or during periods of high volatility, like big news announcements.
Now, why do gaps occur? Well, it's all about supply and demand. Let's say some significant news hits the market over the weekend, and traders react strongly to it when the market reopens. This rush of buying or selling can cause prices to jump, leaving a gap on the chart where no trading activity happened.
Gaps come in different shapes and sizes. You've got your common gaps, which usually get filled relatively quickly as the market catches up. Then there are those runaway gaps - they're like the wild ones that run off and never look back. These often signal strong momentum in one direction and can be trickier to trade.
So, how do traders handle gaps? Well, it depends on their strategy. Some folks see gaps as opportunities, especially if they're trading with the trend. Others might wait for the gap to fill before making a move. And then there are those who steer clear of trading during gap periods altogether, to avoid any unexpected surprises.
The key takeaway? Gaps are just part of the forex trading game. They add a little spice to the charts and can offer trading opportunities if you know how to handle them. Just remember to stay on your toes and adapt your strategy as needed when those gaps come knocking.
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