Gap in the analysis of currencies, stocks, virtual currencies is a common occurrence. The reason is the sudden price increase/decrease at the end of the session, making the closing price no longer the opening price of the next candle. So what is its effect on predicting profits?
Gap candlestick pattern
The candlestick price is usually very stable in each trading session, the closing price will be the opening price of the next candle. The case of Gap shows that the market has news of sudden price impact. Only in a millisecond, the chart cannot keep up with the price, creating a gap. The larger the span, the stronger the effect of the Gap model on the next trend.
How to recognize Gap
There is a gap between the opening/closing of the previous candle and the closing/opening of the next candle. The larger the gap, the more clear the next price trend.
How to use the Gap candlestick pattern to make money
Gap trading strategy is very useful but it does not usually appear at a lead pattern. Traders only use it as advice for analyzing other indicators.
Depending on how the Gap candlestick pattern is formed, a resistance or support level will form. Now you will use it as the Support and Resistance indicator to find when the price will reverse. The high possibility that the price touches the Support and Resistance lines created by Gap going on occurs a reversal.
Market trends when forming Gap
Such sudden price movements may have been affected by the news, the price trend is also affected. You need to analyze more indicators at the same time to make sure the price will change in the direction of Gap. If the Gap appears with a bullish candle, the trend is upward, the Gap with a bearish candle, the price will downward, the larger the gap created, the more likely the new trend will be created.