Gap and advisers
Now a lot of advisers are working daily who work on gaps. Almost always, they are programmed to counteract the market – to move after the gap appears in the opposite direction from the gap. This adviser can search for gaps and immediately respond to them. Among the shortcomings of the robot, it should be mentioned that it does not know how to react if the market quickly regains lost positions. The price often changes very quickly, and the adviser gives an order to buy or sell, but the price changes every moment. However, the fact that the adviser does not know something is not news. He cannot know anything, he simply reacts to events.
When a very large gap appears on the market, it is better not to react to it. So most traders think. Huge gaps are relatively common in the stock market.
Weekends and gaps
On weekends, life does not stop. Different events take place in the world every day. What do weekends mean, for example, for an earthquake or tsunami? And for other natural disasters. And politicians often speak on Saturday and Sunday. Even Donald Trump loves to shock the world with his weekend announcements. What happened on Friday evening is not at all what Monday morning is. That is why the probability of gap after weekends and holidays is increasing.
Demo Account and Gap Trading
Can I learn to trade on gaps using a demo account? Can. To do this, you need to have some knowledge and a little patience. And still: trading on gaps in the training and on the real account is not the same thing. And what happened in the past is related to what will happen in the future.
Get ahead of the gap
Is it possible to get ahead of the gap and during a sharp rise or fall in prices to be in time to enter the market? This is impossible, and speculation on this subject is inappropriate.
Friday night entry in a huge lot
Some exchange players enter the market with a large obscene lot, for example, 1: 500 or 1: 1000, to sharply increase their capital. In case of success, they will experience huge success, and in case of failure – the loss of the entire deposit. In their opinion, the game is worth the candle. But it is not known how this or that broker will react to such behavior of the trader. It is possible that such a transaction can be canceled, according to one of the clauses of the contract.
I summarize for each item
- Earnings on gaps in the stock market:
Remember that stock price gaps do not always heal. A stock can rush in one direction and move without returning years and decades. And the probability of canceling a transaction when the chart moves by more than 10% is very high.
- Earnings on gaps in the foreign exchange market:
In the foreign exchange market, it is easiest to make money on a gap, since the probability of a gap overgrowing in this market is very high. But do not flatter yourself: this does not always happen.
- Earnings on gaps in the commodity market:
On the commodity market, gaps occur quite often and they do not always overgrow.
- Earnings on gaps in the precious metals market:
In the gold and silver market, the probability of gap formation is high but slightly less than in the foreign exchange market.
Do gaps seek to overgrow? Yes, they strive! And in most cases, price gaps heal. As a rule, gaps are formed on the stock market, less often on the commodity market and even less often on the currency market. You can earn on gaps in price, but this trading tactic should not be the only one in the trader’s arsenal.