What is a Gap?

Hep (from the English gap) is the so-called "rupture" quotes on the trading chart, which can occur when there is a very rapid, sudden change in trading prices. On hep. is manifested as a strong "jerk" of the trading price in any direction, as a result of which there is a noticeable gap between the closing levels of one period and the opening of the next. Hep can only be observed using the trading chart display mode - bars or Japanese candlesticks.

Emergence of hep

More often than not Gap you can see after the weekendWhen after Friday's close, the opening of Monday's trading day for any currency pair differs greatly from the previous one. Clearly, it looks like a "gap" in price. The point is that on weekends, exchanges stop working, while banks, exchangers and enterprises continue their work and everyone needs currency. After the weekend market opens with a sharp jump in currency prices, these prices are formed over the weekend and it's called a gap.

Gap can also occur not only after the weekend, but at one of the trading sessions, it can be seen in the presence of very significant Forex news, such as GDP, inflation and, of course, the announcement of the interest rate decision.

In various directions of market analysis there is an opinion that the market after a certain period of time closes the gapthat is, it returns to the closing price of the previous, "pre-default", time period.

Using Hepa

Often hep not only seems to be a consequence of a strong trading trend, but also is a signalThe new trading period may be a confirmation of the previous one. For example, if the opening of a new trading period was noticeably lower than the closing of the previous one, it may indicate a possible downward tendency of the quotations. Take a look at the picture below. After the downward gap, the downward movement of the trading quotations moved further in the same direction.

The opposite situation - if the opening of the next trading period occurs noticeably higher than the closing of the previous one, the "gap" reflects the tendency of trade quotations to strong growth. After the hep up there is often a noticeable increase in prices. This is what happened in the following example in the figure below, where there was an increasing trading trend, after a noticeable gap occurred, this trading trend only intensified, the price quotes reached new highs.

In many cases in a liquid market, gaps are overlapped by so-called pullbacks - that is, closes. This means that sooner or later, trading prices will return to the closing level preceding the gap, and only after this happens, an increase in the existing trading trend of price movements occurs.

Conclusions

Of those listed hep features we can make the following conclusions: it is possible to expose the pending trading orders Limit and Stop at the closing level of the period preceding the gap. For example, if there was a gap upwards, we put Buy Limit order to the closing level of the previous trading period as shown in the figure: