A gap on the chart looks a lot like a skipped heartbeat, which it kind of is. However, in reality it isn’t as bad as it might sound. In fact, a fair share of trading strategies are built on the idea of gapping. Today we are going to discover the nature of market gaps and find out how to trade gaps successfully. 

The phenomenon known as a price gap in forex trading is actually a pretty simple concept. The price gap is the empty area, hence the name, that occurs when the opening price of a candlestick is not the same as the close price of the previous candlestick. Despite not that common as in stock trading, gaps do happen in the forex market too, mainly because of the fact that the forex market is closed for retail traders during the weekend but it is still active for operations by the International Bank.

Gaps primarily occur over the weekend because it is the only time the forex market closes. Gaps may also occur on very short timeframes such as a one-minute chart or immediately following a major news announcement. A gap is a change in price levels between the close and open of two consecutive days. Although most technical analysis manuals define the four types of gap patterns as Common, Breakaway, Continuation, and Exhaustion, those labels are applied after the chart pattern is established.