How to trade a gap? (strategy, short term 1 minute chart)
1 we have to analyse what kind of gap was it. ( runaway, breakaway, exhaustion)
2 current gap on a 1 minute chart is a Breakaway, as it has broken through a short term trend line,
3 when we have a breakaway gap, the gap close is less likely, so we're waiting for a consolidation that will nearly fill the gap, in our sample it's 50% Fibonacci area.
4. we're placing a limit orfer to catch a better price
5. in case if the order has not been hit, we're waiting for earlier confirmation of our signal to manually enter a trade.
6. in case if the gap trade has been missed, we can use a gap as a compass for a future trades (short term), for example, current potential target can be a stop order trade, but I will explain it later.
2 current gap on a 1 minute chart is a Breakaway, as it has broken through a short term trend line,
3 when we have a breakaway gap, the gap close is less likely, so we're waiting for a consolidation that will nearly fill the gap, in our sample it's 50% Fibonacci area.
4. we're placing a limit orfer to catch a better price
5. in case if the order has not been hit, we're waiting for earlier confirmation of our signal to manually enter a trade.
6. in case if the gap trade has been missed, we can use a gap as a compass for a future trades (short term), for example, current potential target can be a stop order trade, but I will explain it later.