Several factors can influence the field of trading. These are usually the gaps in the market where the price has jumped and has not been profitable for the trader. They occur when the price opens higher than the close and high of the previous candlestick. Likewise, spread declines occur when the price opens lower than the close and low of the previous candlestick. Discover in this article the different types of deviations (gaps).
Risk management
In trading, risk management aims to define a clear and orderly technique to maximize gains on winning trades and minimize losses on losing trades. Gains and losses are indeed part of the daily life of a forex trader. However, trading gaps are not closed especially when there is a price movement. Usually there is a finer categorization of market gaps that includes : • Common deviations ; • Continuation or leakage deviations ; • Breaking gaps ; • Exhaustion gaps.
Common deviations
Common gaps or gaps are the most common found in less liquid markets. They are generally deployed during minor events that affect the life of the titles. These gaps have no negative impact on the market because they are filled quickly. In addition, they are said to be filled when the price returns to the previous closing point.
Continuation or leakage deviation
Continuity or leakage deviations, are market deviations that point to the continuation of a particular trend in the same direction as the direction of the deviation. Trailing spreads occur on both upward and downward trends. Indeed, on the uptrends, they occur upward reinforcing the uptrend and can be qualified as increases in the spread. It should be noted that these types of gaps are not easy to bridge.
Breaking gaps
Breakout spreads give instruction on trend change, a chart breakout or a channel exit. In general, they are accompanied by strong volumes and, ideally, as wide as possible. Also, they are followed by another chart template. Note that these types of gaps are difficult to overcome.
Exhaustion gaps
Exhaustion gaps arise at the end of the movement and mark the end of the current session. Unlike the previous two, they fill up quickly and in no way act as resistance or support.
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