Gap Trading Strategy: Trading the Open
This specialized strategy is designed for CFDs and active stocks (like AIG) but can be adapted for Forex indices. It capitalizes on market Gaps occurring at the opening of the American session, trading the continuation or filling of the gap using defined risk levels.
Strategy Profile
Instrument
CFD / Shares
Timeframe
M5
Condition
Market Gap
1. Identifying the Gap
Monitor the market at the opening of the American session:
- Gap Requirement: The price must open with a gap of at least 10 points from the previous close.
- Direction: Trade in the direction of the gap momentum.
2. Trade Execution
Sell Trade (Gap Down)
If the market gaps down significantly:
- Open Sell: Enter immediately at the open.
- Stop Loss: Place at the closing price of the previous day (Gap fill level).
Buy Trade (Gap Up)
If the market gaps up significantly:
- Open Buy: Enter immediately at the open.
- Stop Loss: Place at the closing price of the previous day (Gap fill level).
Trade Management
- Take Profit: Minimum 40 points.
- Risk Management: This is a high-volatility strategy; ensure position sizing is appropriate.
Trade the Open: Capture session gaps and reduce trading costs with FXRebate.
