Gaps: How do you cope with them?

[fxjj5]

gaps are most problem which trader commonly faced and hate them.

 

[carnelian]

I don't give too much attention to the gaps only if its very wide I don't trade on that pair. Gaps are a mystery to me and I don't know how to cope with them.

 

[ruseneca]

I don't give too much attention to the gaps only if its very wide I don't trade on that pair. Gaps are a mystery to me and I don't know how to cope with them.

If the gap is more than 15 pips, I usually choose to trade. That happens as soon as the market opens. The probability for price closing the gap is very high.
The problem is when you trade and your orders are slipped, e.g. closed on another price. That happens with ECN brokers and market execution.

 

[Sigmund]

Gaps! Don't we hate them!
But they often indicate a trend continuation, or even a trend reversal when price gaps in the oposite direction of a trend. This can further be confirmed by a move that follows an oscillator divergence.
Of course the bad part is when you are already in a trade and price gaps against your position. There is nothing that can be done about that.

 

[EURUSD]

Usually gap occur on monday morning, sometime one candle jup with gap to next candle with long distance, but often also after gap occured then slowly price move to cover the gap

 

[dianajs]

I try to avoid dealing with gaps almost altogether by following two simple rules - I don't trade during high impact news events and I try to close my positions before the market closes on Friday. Apart from that, I open position with a small enough lot so as gaps caused by unexpected news wouldn't cause me major trouble.

 

[TareqS]

The best way to avoid the impact of gap is avoiding trading during big news event. As a retail trader, trading just before the big news event can be too volatile to handle for big gaps.

Weekend gap is annoying too. It makes me wait more to find out a break. However, small gaps are alright.

 

[EURUSD]

On monday usually often occur gap on the chart, but indeed often although not always if on monday occur gap then slowly price will move and descover the gap again, some trader using gap for start trading

 

[dianajs]

Regarding trading the actual gaps after they occur - while it is true that the probability of the instrument recovering the gap is high, I don't open a position before I have seen a confirmation that a reversal is about to occur. Usually that confirmation takes the form of a candlestick formation that is a signal for such a reversal.

 

[Ken Smith]

I am really interested to know how you colleagues cope with market gaps when they occur.
Last night, several seconds after FOMC meeting and discussions about the fiscal policy, I experienced a market gap worth 38 pips on EUR/USD as soon as my pending order was triggered. Instead of executing my stop loss at the set price, my broker did that at the first available price which was 38 pips away. My account just passed away ( with a negative balance which was covered by the broker ).
Almost 3 out of 5 orders are slipped because of gaps.

How do you cope with such gaps?!

What you are saying is slippage. Slippage is common especially during big news release. There are some brokers that give bigger slippage than others. You can avoid those brokers. And for news trading you need good risk management policy. Without that it's not a good idea to gp for news trading. If I don't have proper weapon and shield, why would I go to the battle field.