With a breakaway gap, it can indicate that a new trend is about to develop. Whenever the market is bound by ranges and the gap forms outside of this range, that is what is called a breakaway gap. Another type of trading gap is the Runaway gap in which the gap forms in conformance with the current trend. For example, if the current trend is bullish and the gap that is formed is a gap up, then that gap is a runaway gap.
Vice versa applies for bearish runaway gaps. The final type of trading gap is known as an Exhaustion gap. As the name suggests, this type of gap indicates a trend reversal following a long and prominent trend. The best way to trade the exhaustion gap is usually to watch the following candle and upcoming candlestick pattern or price action.
In the chart below, you can see that the following candle after the exhaustion gap formed the Doji candlestick pattern. This was a clear reversal pattern. Trading the gaps is a matter of choice. While some traders swear by trading gaps, other traders avoid doing so. Some traders have found that, depending on the particular currency pair, the gap tends to be filled in the majority of cases. These traders therefore feel comfortable trading the gap. These traders avoid trading the gaps.
The truth is that trading the gaps may be profitable if you choose the right currency pairs or stock indices and if those markets tend to fill the gaps more often than not. If you choose to trade the gaps, there are a few things that you should bear in mind. To begin with, it is best to use a currency pair or market that is very volatile. When this is the case, the gaps tend to be wider and the probability of most of them being filled is greater than with less volatile currency pairs or other markets.
Once you have identified an appropriate currency pair, you should look for trading gaps on Sunday evening or Monday morning depending on when your broker starts trading after weekends. With this type of strategy, some traders believe that it is best to avoid using stop losses and take profits since the bottom and the tops of the gaps would naturally act as stop loss and take profit points.
However, other traders believe that stop losses should always be used and should be set at key resistance or support levels to avoid huge losses. The choice depends on the choice of every trader based on his own risk assessment. However, in general, stop-loss orders should be definitely placed in every trade. When trading the gaps, you can keep the trade open until near the end of the weekly trading session. For example, a significant intraday gap was seen on the charts of the currency pairs including the Swiss franc, when the Bank of Switzerland announced removing the cap on the Swiss franc's euro exchange rate.
When the disasters at the Fukushima nuclear power plant in Japan or in New York on 11 September, , had happened, intraday gaps also occurred on many charts. Taking into account such events, investors immediately change their attitude to the estimation of currency value and begin to actively send their orders at new prices, which are much higher or lower than the current ones, that results in price breaks on the price chart. In traditional technical analysis, gap is used as a quite reliable and popular pattern used to enter the market or exit an already open position.
Many traders apply gaps in their trading, because this pattern often presents a good opportunity to make money with a fixed Stop Loss, a predictable Take Profit level and a good probability of the pattern materialization.
As noted above, price break on the charts is explained by a strong shift in investor sentiment regarding the actual value of currency pairs. Accordingly, the level at which a gap originated and the price level where trading continued are considered to be important price levels that can further act as support and resistance.
Traders noticed the following regularity: when a gap is being formed, the price often tends to fill this price break. The given statistics applies particularly to weekly gaps, since intraday gaps occur much less frequently and are formed as a result of high-impact news releases. Filling such gaps can happen for several days or even weeks, because the news can be so important that investors will not soon be able to believe that the price can actually return to the previous levels.
Gap trading strategy is based on the above-described regularity of filling weekly gaps in the first hours after the market opens. This strategy is one of the most popular and stable. In other words, to trade contrary to retail traders. If a currency pair gaps up at the Monday open, a trade should be opened in the downward direction Sell ; if a currency pair gaps down at the Friday close, a trade should be opened in the upward direction Buy.
You should enter a trade 30 minutes after the market opens, because, statistically, the market still moves towards a gap direction for the first 30 minutes. When the first candlestick closes on M30 timeframe, enter a position towards a gap filling. Before filling a gap, the price may still go against your position for a while, so you need to determine an acceptable level of Stop Loss to stay in the market.
Professionals should start from individual needs and wishes. When should I open an ECN account? There is no doubt about the popularity of ECN brokers: they are preferred by thousands of traders from all over the world. But let's see if such companies can really be called universal, or if there are cases when it is unprofitable to open an ECN account. First of all, an ECN broker makes it possible to trade with liquidity providers directly.
The trader does not depend on the broker, on quotes within the company or on other nuances. The broker is simply an intermediary. This means that the trader will get access to real market data. And this condition is beneficial to all traders. At the same time, ECN brokers offer a floating spread. This condition makes trading more difficult and unpredictable because a novice trader will not be able to assess the market situation and understand when it is better to open a deal so that the commission is lower.
Also, this condition is not suitable for clients who are actively investing with conservative risks, because it will not be possible to calculate the exact amount of the commission, its size is constantly changing. Read more: I got a margin call: we explain what it is and how to avoid itDo not forget about the high-speed execution of transactions.
This condition seems attractive, but in fact, it is not suitable for all traders. High speed is an important criterion when it comes to scalping. Traders with such a strategy really need to cooperate with ECN brokers, because the profitability of their work depends on the accuracy of order execution. Novice traders simply will not be able to take advantage of ECN technology.
It is necessary to take into account the instruments with which the trader works. When trading cryptocurrencies, currency pairs and other assets with high volatility, the speed of transaction execution matters. But if a trader chooses to trade instruments with medium or low volatility, then the speed of work does not play such an important role, because the price of an asset simply will not have time to change in one or two seconds.
So, if the speed of execution of transactions is important to a trader and he works with highly volatile instruments, then it is definitely worth opening an ECN account. In other cases, it is necessary to build on the trading strategy and the client's requirements for trading conditions.
Is an ECN account suitable for beginners? Novice traders and investors, when choosing the first broker, often pay attention to absolutely all criteria in order to eventually choose the best of the best. This strategy can be understood because most traders want to choose a company for long-term cooperation, but there are criteria that are not so important for beginners. These include the availability of ECN technology. This system really has a number of advantages over dealing centers, and many novice traders are captivated by it.
But it cannot be said that the presence of ECN accounts is a mandatory criterion and when choosing the first company for trading, you should pay attention only to ECN brokers. An analogy with cars would be appropriate here: to learn how to drive, it is not necessary to buy a Lexus or a sports car. Yes, they will surpass some Opel in terms of characteristics, but their functionality is redundant for a novice driver.
To get basic driving skills, it's enough to start with driving an Opel. Exactly the same principle works with ECN accounts: a novice trader can open them, but it is not necessary to do it at the very beginning when there is no experience in trading yet. After all, a beginner, having gained experience, can always change the type of account or broker. Read more: Who are Market Makers and what are they doing on the market? Advantages of ECN technologyECN brokers appeared not so long ago, in , but over these 20 years, they have become popular both among professional market participants and among those who are just taking the first steps in trading.
We can talk about the advantages of ECN brokers for a long time, but we suggest first highlighting three main advantages:Fast execution of transactions. No requotes. Low spreads. Often these three factors are enough for a trader to pay attention to companies with ECN technology when choosing a broker. However, these are not the only reasons why it is worth choosing ECN brokers to work in the Forex market.
It is equally important to understand how the broker earns. For example, the main difference between ECN companies is that their earnings consist exclusively of spreads - the commission that the trader pays for the execution of the transaction. That is, the broker is not interested in clients "draining" their deposit. Also, ECN brokers do not participate in transactions. The company does not influence the trading process, does not set its own quotation indicators that would be beneficial to it, etc.
There is no human factor in ECN technology, so customers get access to real market conditions, and the trader's transaction gets to the counterparty who currently has the most favorable quotes. As we have already said, ECN brokers cooperate with the world's largest liquidity providers, therefore, the level of liquidity of instruments in such companies is very high.
There is no option that a trader will buy an asset, and after a while will not be able to sell it. In addition, ECN companies, as a rule, provide services at the international level and assume a large trade turnover, so you can trade with them at any time of the day.
Another advantage of ECN brokers as intermediaries between the market and the trader is the absence of restrictions. What does it mean? The ECN company is not involved in the trading process, and traders' trading strategies are not displayed in any way on the broker's earnings, so cooperation with the ECN company assumes that a trader can use any trading strategy, as well as a variety of instruments.
ECN brokers often allow the use of Expert Advisors and other software to automate the workflow in trading. Separately, we need to talk about the high speed of execution of transactions. This factor becomes key if a trader is looking for a broker for scalping. And ECN brokers in this case become unequivocal favorites, because the trader, in addition to being able to use a scalping strategy, gets the highest possible transaction processing speed and access to instruments with good liquidity indicators.
Read more: Features of intraday trading on the Forex marketDisadvantages of ECN technologyWhen choosing a broker, it is important not only to pay attention to its advantages but also to know exactly what disadvantages it has. ECN accounts are no exception, because, despite many positive aspects, they also have a number of disadvantages.
These include:A high level of minimum depositECN brokers are often chosen by those traders who already have extensive experience in trading and who have built a trading strategy. They understand that ECN technology provides many advantages, and are willing to pay for them. Moreover, ECN brokers do not set the most affordable minimum deposit for traders. Difficulties in tradingIt is not so easy to make transactions using ECN technology.
In order to trade and make a profit, a trader needs to understand the principles of ECN, as well as navigate the market, be able to respond to trends and sharp price changes, take into account the news release and analyze the market situation as a whole. Technical analysis instruments can help with this, but they will not replace your own trading experience. Therefore, novice traders are advised to choose the demo version of an ECN account in order to gain experience and not risk their money, and only then proceed to real trading.
Read more: ECN Forex account: what is it? CommissionYes, ECN brokers earn income from spreads, but they can also include a separate, fixed commission per lot in the price list. At the same time, spreads are floating, their size depends on the market, and it is impossible to calculate exactly how much you need to pay the broker for the execution of the transaction.
At the same time, it is definitely impossible to say that a floating spread is a disadvantage. Professional traders know how to use this factor for their own good and reduce the size of commissions, but it will be quite difficult for a beginner to deal with it. After all, spreads can both narrow and expand in certain market conditions. Whether to open an ECN account or not is not a rhetorical question at all.
To understand if there is a need for it, it is enough to define your trading strategy and understand what conditions are important to you in order to achieve maximum efficiency in working on the Forex market. May 18, IndexaCo. Practical advices on choosing a Forex broker for a beginner.
The first task that every novice trader faces is choosing a broker. There are many companies on the market, but not every one of them is suitable to start your way in trading. Brokers that are suitable for beginners can be determined by a number of criteria.
We propose to analyze each of these criteria in order to learn once and for all how a novice trader can choose the first broker to trade on Forex. Broker selection criteria for novice tradersA novice trader should pay attention to the following criteria when choosing his first broker:reliability;deposit;types of accounts;instruments;methods of depositing and withdrawing funds;commissions;leverage;bonuses;training;support service.
Having correctly evaluated each of these criteria, any novice trader will be able to easily choose a broker. Read more: Forex risk hedging: why is it necessary? Reliability of a Forex brokerThis factor is equally important for both beginners and professionals. Choosing a broker, first of all it is worth checking whether you can trust him.
It is not difficult to do this - reliable companies have a license to provide services, they are registered and regulated by special authorities. The license can be either local issued on the territory of a particular country or international. To determine the country in which the broker is registered, it is enough to check the address of the main office: as a rule, it is in this country that the company is registered.
As for regulatory bodies, the more of them, the better for the trader. You can check the availability of a license, the registration address and the presence of regulatory authorities in the "About the company" section. Pay attention to the dates indicated in the last line: in most cases, you can use them to determine how long the broker has been providing services. The exception is brokers who have rebranded and changed the site address, but they are rare.
The longer the company exists, the more reliable it is. This information will help a novice trader distinguish time-tested companies from one-day scam brokers who receive money from clients, and then suddenly close, leaving the would-be trader with nothing. Talking about the safety of the client's capital.
In order to avoid worrying about this, we recommend choosing companies with segregated accounts. What is a segregated account? This is an account registered with a bank or other financial institution in the name of a client to which the brokerage company does not have access. Thus, the trader can be sure that all his money will remain frozen and the broker will not use it for personal purposes.
So, to choose a reliable broker, a beginner should focus on the following factors:Availability of registration and license. Which authorities regulate the broker's activities. The term of the broker's work. Does the company offer segregated accounts. If you cannot find the information you need on the broker's website, we recommend contacting the support service and requesting the data you need before opening a real trading account in the company.
Broker's minimum deposit amountThe first thing that novice traders focus on is the size of the minimum deposit. In other words, this is the minimum amount by which a trader can top up his account to start trading. The lower it is, the more accessible the broker is. By the level of the minimum deposit set in the company, it is easy to determine whether the broker is suitable for novice traders. And this is logical - Forex trading involves risks, and the broker does not guarantee that the trader will earn and be able to "recapture" the invested funds.
It is for this reason that Forex brokers for beginners set a low deposit level. Each broker sets the minimum deposit amount independently. Read more: How much can you really earn on the Forex marketTypes of Forex trading accountsBeginners turn to this criteria much less often, and in vain: after all, trading conditions, in particular, the number of available instruments, services and free functions, may depend on the type of account.
However, it is not necessary for beginners to check the trading conditions for each of the accounts offered by the broker. At the beginning of the trading path, it is worth paying attention to two types of accounts:demo account;cent account. A demo account is a virtual account. With its help, novice traders can get their first experience in trading without risking their own money.
It is worth noting that it will not be possible to make money on this account, its task is to give the trader the opportunity to practice and see the results of his actions, whether it is a virtual profit or a virtual loss. When the trader has gained his first experience on a demo account, you can move on to real trading.
In this matter, the best broker for beginners is a broker who has cent accounts. Their difference from a regular account is that the amount on deposit is calculated in cents. Accordingly, it is possible to trade on a cent account using tiny amounts, however, the amount of profit will also be small. A cent account is also considered a training account, however, unlike a demo account, it allows you to trade in real market conditions and monitor the psychological reactions of a trader to receive a real loss and profit.
Forex trading instruments and assetsThere are enough brokers on the market that offer a huge selection of instruments, but there are also companies in which the assortment consists of only assets. Which broker is better for a beginner? Both the one and the other. The number of trading instruments is not a key criterion when choosing a company, but it is still worth paying attention to. The fact is that a novice trader needs not only to gain experience in trading but also to understand which instrument he likes to work with the most and to assemble his own "inventory".
And this can be done only if the broker offers a fairly wide range of assets. This does not mean that you should choose a broker that will offer more instruments. The question, first of all, is diversity - it is important that the company offers not only currency pairs but also, for example, stocks, indices and metals.
We advise you to focus on these criteria when choosing a broker. When trading currency, a trader buys or sells the currency that is indicated in the first pair GBP while paying the second USD and earns on the price difference. There are both standard currency pairs and exotic ones, which include non-common currencies.
Cryptocurrency is an extremely popular instrument, the benchmark of which is Bitcoin. This is an electronic currency that is not tied to any country, and you can earn it in different ways. For example, buy and sell on the same day, or buy and wait for its price to rise in order to sell the cryptocurrency more expensive. Metals - this group includes gold, silver, copper and other metals according to the standard. CFD is a more complex instrument.
Its specificity is the ability to trade on the price difference. It works like this: a trader does not need to buy an asset to make money. CFD is a contract between a trader and the owner of an asset, in which a trader can make a profit if the asset price increases from the moment of purchase, or a loss if the asset price falls.
Indexes - this instrument includes several stocks, and its value is the average value of all its components. ETF is also called an exchange-traded fund. In order to earn income, a trader buys a part of a ready-made investment portfolio and receives an equal part of the income from it.
Stocks - Traders can also trade stocks of various companies. Such transactions are already carried out on the securities market, and not on Forex, and it is a little easier to predict their growth or fall. Options are the easiest instrument to understand, but they are not the most reliable.
Options trading is based on bets: in order to make money, a trader needs to bet on whether the price of the instrument will fall or rise. If the bet worked, the trader makes a profit, if not, a loss. Methods of depositing and withdrawing fundsAnother equally important factor that newcomers to the market need to take into account is the payment systems with which the broker cooperates.
A wide choice of ways to deposit and withdraw earnings really allows you to avoid difficulties with transactions and choose the most convenient way. However, payment systems are not only about a comfortable service. Much more important is the speed of crediting funds. Sometimes a trader needs to have more funds in his account to open a new deal that seems extremely profitable to him, and the only solution in such a situation will be the opportunity to make an instant deposit replenishment.
And the transfer speed directly depends on the payment system. For example, transfers through banking systems can take from working days, depending on the bank, so this option should not be considered for instant transfer.
Cryptocurrency wallets also take time to process a payment, from 1 hour. But electronic payment systems allow you to top up your account in a short time. And the more electronic payment systems a broker offers, the more convenient it is for a trader. In particular, an instant transfer makes it possible to start trading immediately after opening a real account.
Forex broker's trading and non-trading commissionA novice trader should also pay attention to the commission when choosing a broker. It can be of two types: trading and non-trading. A trading commission is a fee that a broker charges for making a transaction. It is also called a spread. The spread can be either fixed or floating. A fixed spread is a clearly defined amount that the broker charges, its advantage is the ability to calculate its commission costs.
A floating spread is more suitable for professional traders since the amount of commission can either decrease significantly or increase, depending on the market situation. The non-trading commission is a fee for other actions of a trader, for example, account replenishment and withdrawal of funds, for lack of activity on the account, for account maintenance, use of the trading platform and delivery of quotes.
A non-trading commission is optional, a broker may not charge traders, but all brokers have a trading commission, and the only question is its size: the lower the commission, the more profitable it is for a novice trader to cooperate with the company. As a non-trading commission, it is taken into account whether the broker charges clients a fee for withdrawing earnings to their personal account. This commission may also be charged by the payment system, and not by the broker directly.
Keep this in mind when opening an account. Read more: Demo account with a Forex broker: is it worth using? LeverageWhen describing trading conditions, brokers specify such a parameter as the amount of leverage. What is it and does a novice trader need to take this criterion into account when choosing a company?
Leverage is a function that helps traders increase the size of their deposits by using the broker's money. How does it work? The use of leverage seems to be very profitable for beginners because with its help you can increase your profit, but not everything is so simple. Indeed, leverage can increase the income from the transaction, but it also increases the number of losses if the transaction turned out to be a failure.
Brokers set different maximum leverage values: from to and more. But this does not mean that a trader necessarily needs to use such a function. When opening an account and in its settings, the user can set the desired amount of leverage. Novice traders are recommended to set leverage of to avoid possible losses and practice trading at their own expense.
We recommend checking the use of leverage on a demo account to understand how it works and not to risk your own investments. Broker's bonus programsThe broker's bonus programs are a plus for a trader with any trading experience. The bonus is usually used only for trading purposes, in rare cases, it is available for withdrawal. The amount of the welcome bonus may vary depending on the conditions that the company sets for the bonus program.
It often depends on the amount of the first deposit to the account: the higher it is, the more the trader receives bonus funds to the account. In addition, companies may offer other bonus programs. Brokers also offer an affiliate program, for participation in which you can receive additional income to your trading account. According to the standard, a trader needs to invite new users to the company using an individual referral link. For each of the attracted traders they are also called referrals , the trader receives a financial reward.
Despite the fact that bonus programs allow you to earn additional income, you should not consider them the easiest way to earn money. None of the bonus programs will give you experience in Forex trading, and you should use them only to get additional funds to your account. Read more: Copy trading or auto trading on ForexLearning the basics of the Forex marketThe best broker for a beginner is the one that provides opportunities for learning.
It is as simple as possible to check this criterion - just look at the main page of the company. Useful information is usually found in a separate section called "Training" or "Education". Often, the FAQ section, which contains answers to frequently asked questions from traders, is no less useful for beginners.
But this information is more often related to the trading conditions and services of a particular broker, and there are no trading tips in this section. Read more: Stock market Broker: how to choose it and how to work with itSupport serviceCommunication with the support service is another criterion underestimated by beginners. Trading conditions are undoubtedly important, but practice shows that at the stage of acquaintance with the Forex market, beginners have a lot of questions, which the customer support service helps to solve.
The trader's comfort largely depends on the speed of its operation and the availability of convenient communication methods. A call is one of the fastest ways to communicate, but when calling, it is worth considering whether the broker offers a toll-free number for communication.
It is worth sending a letter to email if the question is thorough for example, related to finances and not urgent since the answer to the email can come both within 15 minutes and within a day. Online chat is the fastest and most convenient way to solve any issue. The average response time in an online chat is no more than 10 minutes. The feedback form, as well as an email, takes time and is not suitable for solving urgent issues. The callback function allows you not to spend money to call the company.
Instead, the trader needs to leave a request, and the support service will contact the client itself. In addition to the speed of response, it is also worth paying attention to the professionalism and level of service of the broker's employees. This factor makes it possible to distinguish a reliable company from scammers, since proven brokers offer assistance in solving any questions, and the answers of the support service are correct and aimed at solving the problem.
While short and not informative answers often indicate that the broker is not interested in a long-term cooperation. Read more: Forex broker: how to choose a good brokerExpert opinion: what else to pay attention to when choosing the first brokerOf course, reviews play an important role in choosing a company: the more positive reviews about a broker, the higher the probability that he can be trusted. At the same time, companies with a small audience should be avoided if possible.
Before opening an account with any broker, it is also important to carefully read the user agreement: it specifies how the broker solves disputes with clients. It is important to know this so that, if necessary, the trader can protect his rights. Pay attention to the broker's website: the more specific information is indicated there, the more reliable the company is. The lack of important information is the first alarm call that it is better to bypass this broker.
Currencies are perfectly combined, complement and compensate each other: the franc gives the pair stability, predictability and pliability to any type of analysis both technical and fundamental work well , while the New Zealand adds volatility. Despite the absence of the US dollar, it still implicitly participates in the auction, since the conversion of one currency into another does not go directly, but through it.
The course is displayed as standard up to 4 characters after the separator 0. Opening the long-term chart, you can see that in general, the price moves up and down with some frequency and a large amplitude in the range from about 0. The currency pair is flat most of the time and only occasionally there are strong bursts of activity up or down, as a result of which the price quickly passes hundreds of points, and then, as a rule, also quickly returns back.
This pair is not characterized by long trends that continue for many years in one direction. The overall volatility of the pair varies greatly from time to time, in some periods it becomes very active and overcomes pips per day, in others it fluctuates very slightly, falling short of a hundred.
If we look at the intraday dynamics by the clock, it will be from to GMT in the Pacific session and at its overlap with the start of trading in Tokyo, Hong Kong and Singapore, as well as from to GMT in the European session, and especially from to GMT at the overlap with the American.
Despite the fact that this is a cross-pair, the presence of a "Swiss" makes it quite predictable, stable and well amenable to fundamental analysis, which greatly facilitates the preparation of a forecast. The dynamics of the pair is well predicted on both medium-term and short-term charts, despite the fact that during the trading day it may change direction 2 or even 3 times.
Low liquidity forces brokers to set decent spreads on this financial instrument about points , which, coupled with not too high volatility, makes scalping on this pair unprofitable and difficult. It is much more profitable to keep positions open for several days or even weeks, which, with a passing trend movement, allows you to earn more on swaps.
Due to the fact that the pair is not widespread, it will not be easy to find ready-made analytics, but it is possible, for example, in thematic sections on trading forums. However, the undoubted advantage of this pair is its relative predictability and the ability even for an inexperienced trader, after a little research of the available data and the most important factors, to make his own forecast accurately enough.
New Zealand is a small island nation to the southeast of Australia, living by exporting services, oil, agricultural products and international tourism. Located in a mountainous area, it is surrounded on all sides by the European Union, but, nevertheless, it is not part of it itself. The country is divided into administrative units — cantons 20 and semi-cantons 6 , and has several official languages at once French, German, Italian, Retro-Romansh. By sector, the Swiss economy looks like this:Services account for about International investments play a crucial role for the Swiss economy, and tourism plays an important role.
Of the factors most affecting the dynamics of the New Zealand dollar against the Swiss Franc, it is necessary to highlight:the world price of gold;oil prices;trade balance of New Zealand and to a lesser extent Switzerland ;economic indicators of both countries, as well as the European Union, the USA and Australia;the volume of investments in the Swiss economy;Central Bank rates;change in the inflation rate;prices for agricultural products;weather and climatic conditions in the area of New Zealand to a lesser extent, but also relevant for Switzerland.
Features of the currency pairDespite the fact that the stability of the Swiss economy has significantly shaken in recent years, the franc still remains one of the most stable currencies in the world, and its presence in the pair makes it much easier to predict the exchange rate and fundamental analysis, since all the emphasis can be shifted to the study of factors affecting another currency. Circumstances allow carry-trading on this currency pair because the difference between the refinancing rates of the participating countries is quite large 1.
Today, the swap sizes are equal to: The values are not large at all, but nevertheless allow you to receive a small additional income under certain circumstances. For professionals working on long-term timeframes D1 and more , Price Action indicator-free trading and its various varieties have proven themselves well. Since, as noted above, in the long term, the price moves up and down, almost always returning, potentially the most profitable, but at the same time the riskiest strategy will be martingale trading.
May 15, IndexaCo. The Canadian dollar to Japanese yen cross-pair is not one of the most popular tools among forex traders, however, due to some of its advantages, it has a certain number of fans who earn good money on it. The average volatility of the CADJPY chart makes it possible to get decent earnings without big risks in medium- and long-term trading.
The exchange rate chart shows fairly long trends, which makes working with the currency pair quite predictable and stable. In this pair, the dollar is the base currency, the dynamics of the currency pair directly depends on its exchange rate. The yen, as a quoted currency, affects the currency pair in the opposite direction, the growth of the Japanese monetary unit leads to a decrease in the value of the quotes of the currency pair.
Since the Canadian dollar is purchased for yen, quotes for CAD JPY are displayed with an accuracy of two decimal places for example — Fans of long-term sessions are advised to analyze the situation during the European session the first half of the day in order not to be distracted by short-term dynamics.
It is known that the Japanese economy, firstly, is highly dependent on raw material prices, and secondly, is largely export-oriented. Therefore, the Japanese authorities strictly monitor the exchange rate of the national currency, and even in the recent past, the famous currency interventions of the Bank of Japan took place. The Canadian economy is also largely export-oriented, where the main trading partner is the United States, but imports from Asian countries also take place, so Canada does not seek such a significant weakening of the national currency as Japan.
Both economies depend on the situation on the raw materials market, but Canada not only imports it for the needs of industry, but also exports it timber, wheat, oil. The land of the rising sun has very limited reserves of its own raw materials, which in no way can cover the needs of a developed industry, therefore it is forced to buy it in large quantities.
The influence of fundamental factors on this pair is very large, but it is better not to rely heavily on technical analysis especially in the long term. Today, economic news has a big impact on the pair, especially related to trade balances, oil prices and changes in Central Bank interest rates first of all, Canada, since the Central Bank of Japan has been holding a low interest rate up to negative for a very long time.
At the same time, there is an economic recovery, both in Japan and in Canada, and the importance of US policy may be exaggerated. Imports increased by only 0. In Japan, total exports grew by 5. The Canadian dollar is highly dependent on the US dollar. Two huge countries are trading partners, the collapse of the economy of one of them will certainly pull down the second. When analyzing the Canadian dollar, it is necessary to take into account the American economy.
Canada ranks 5th in the world in terms of popularity among tourists, so the tourist business significantly affects the local dollar exchange rate. Moreover, tourism in Canada is year-round, so it should always be taken into account. With a competent approach, you can make decent money on this. If the well-being of the citizens of the world's leading powers improves, then they have more opportunities to go on vacation to Canada, and the currency of this country is strengthening.
Conversely, international crises and unrest worsen the quality of life of potential tourists, there are fewer guests in the country we are interested in, the CAD is weakening. The indicator of the national currency reacts sharply to the dynamics of the cost of raw materials.
Situation analysis also requires taking into account the weather conditions in the countries. Various elements negatively affect both currencies for completely different reasons. In Canada, the weather rarely deteriorates, infrastructure collapses even less often because of it, but any negatives cause an outflow of tourists, and hence income to the budget.
In Japan, the elements are raging more often, have serious consequences and can scare away large investors who want to contribute to the country's economy. Almost all major brokers host calendars of important financial events and news that will be a good help in trading and forecasting for this currency instrument. Since Forex trading takes place around the clock from Monday to the end of Friday, and a high spread will not allow scalping, there is not much point in talking about the dynamics of the exchange rate and the level of volatility in the context of specific trading sessions within the day, but if someone is still interested, then the main trades for this pair are conducted in the American session and to a lesser extent degrees in European London and Asian after the opening of the Tokyo Stock Exchange.
Fans of "trading for a breakdown" can enter the market at the opening of the American session at GMT or at its overlap with the European one. A significant spread caused, as in other cross-pairs, by double conversion Canadian dollars are changed to American dollars, and only then yen is bought for USD. The "piper" is unlikely to be able to recoup his trade at all, even despite the high volatility. The issuer is the Bank of Canada. It is a "commodity" currency unit, since the economy is dependent on exports of timber, energy and oil.
The Loonie is strongly influenced by the neighboring country of the United States and its economic component. JPYThe Japanese yen is the third largest trading currency in the world. Its issuer is the Bank of Japan. The "safe haven" currency got its nickname due to the low level of inflation, plus relatively high economic stability.
Low interest rates make it possible to maintain a low value in relation to other currencies. The monetary unit is often used in trading operations, especially in Asia. The government's support of a low exchange rate is a historical tradition that creates favorable conditions for exporters and contributes to economic growth. Like most other cross-pairs, this one also behaves quite unpredictably, and it is not known which is easier: to make a forecast yourself or try to find analytics on the network.
Let's figure out these difficult questions and find the answers. General characteristicsThe British pound sterling - Australian dollar is a currency pair that is not very common among most Forex traders. A significant spread in this, as in most other cross pairs, makes it little suitable for scalping, however, due to rapid and sharp price movements in both directions in a short period of time, intraday short-term profitable trading strategies are quite acceptable.
The main currency is the pound sterling, while the Australian dollar is convertible, that is, the purchase of British pounds for Australian dollars is carried out. Since this is a cross rate, the calculations are carried out through the US dollar, for example, when buying AUD, pounds are sold for dollars, and Australian currency is bought with dollars. On the one hand, the UK is leaving the EU, the future of which is currently very vague, and there is a possibility of losing Scotland along the way.
On the other hand, the country—continent of Australia, whose economy has ups and downs, is highly dependent on natural materials and weather. Australia's main trading partner is China, whose economic slowdown does not bode well for Australian exporters of energy and raw materials. An important role for the UK is played by oil and gas production focused on the North Sea shelf, but ironically, if a second referendum on Scotland's secession is successful, England risks losing all its northern deposits geographically related to Scotland, which categorically does not want to leave the EU.
Despite the fact that Australia has been an English colony for a long time, due to time and local specifics, over the years of independence, the difference in economies has become significant, and the speed of reaction of national currencies to changes in the United States and the world is also very different.
However, such an approach can be dangerous in crises, as the case of the Japanese yen in has already shown. However, the accuracy of the above percentages is not constant and may change from time to time, both up and down, which must be taken into account in your calculations.
To make money trading on GBPAUD, it is necessary to take into account the high spreads of the cross pair, which is why it will be profitable to trade in the medium and long term. The currency pair shows good long trends, so it is loved by positional traders. If you want to make money on short—term trading, it is best to use fixed Forex contracts, since they are devoid of spreads, and the profit on transactions is fixed.
To make a profit, you need to specify whether the rate will rise or fall at a certain point in time, for example, after 10 minutes. Features of the currency pairGBPAUD does not lend itself well to technical analysis and sometimes behaves contrary to the probable expectations formed by the indicators. It should also be taken into account that the presence of a pound in a pair brings such an unpleasant feature to her behavior as a weak reaction to some, at first glance, important news or even almost complete absence of it.
Options remain a universal and easier way to trade on this pair, an example of which we showed you a little above. Also, this cross-pair is characterized by the presence of trends of average time duration with sluggish development. The strongest forecast is always with the prefix Active buy or sell.
The forecast for the "Loonie" against the Swiss Franc is based on both fundamental and technical indicators. The pair is well predicted to cross the SMA lines by the price. This is confirmed by its chart itself, looking at which, it can be seen that the pair is one of the "quietest" in terms of volatility, even in comparison with other instruments in which CHF is present.
During the trading day, it usually does not pass even 70 points. On the hourly chart, it usually does not go beyond 20 pips. During the week, the greatest activity on this instrument is observed on Thursday, the least — on Monday.
As with most other instruments, the peak of trading of the Canadian dollar — Swiss Franc pair falls at the intersection of the European and American sessions at UTC. It was already noted above that this is a cross since the US dollar does not participate in the pair , however, the calculation still always goes through USD. Francs are converted into US dollars, and those, in turn, into Canadian dollars.
The Canadian economy, which mainly receives income from the export of goods and raw materials, largely depends on such indicators as: energy prices, wood, wheat. An important role for Canada is played by trade with the United States, which is the main trade and economic partner. Tourism also occupies not the last place in the country of the "maple leaf", and a significant influx or outflow of the number of people wishing to visit it can have a significant impact.
Switzerland is famous not only for the production of cheeses and chocolate products, but, first of all, for the production of sophisticated equipment, luxury watches, expensive medicines and high-precision optics. Agriculture, as in the Canadian economy, brings only a couple percent of GDP. For the Swiss economy itself, international investments are of the utmost importance, and when making a quotation forecast, it is necessary to take this into account. The Bank of Canada, when analyzing the pair, should pay the most attention to the dynamics of the price of gold although the franc has not been tied to it for a long time , oil, trade balances of both countries and changes in interest rates of the Central Bank.
Although there is no direct involvement of the US dollar here, as in the case of other crosses, it also has a major impact on both currencies, as well as the economic performance of America as a whole, because it is also the main trading partner for Canada and not the last for Switzerland.
Another way to trade a gap is to trade the price action after the gap is filled. Some traders assume that it will act as an area of support or resistance and that price will continue to move in the direction of the gap. So you would wait for the gap to be filled, before entering the trade. In this example, it worked out well and price rocketed back up, after the gap was filled.
To trade this method, you would have to judge the strength of the trend and make a call on a continuation. Instead of a physical gap, price simply moves very quickly through a price range. This is a concept that I learned from Chris Lori. Since there is actually price action through this price range, I consider it a Pseudo Gap.
Whenever price returns to this area on the chart, it can have the tendency to run through that price range very quickly. As you can see here, after the real gap was filled, price continued upwards to form a Pseudo Gap shown by the arrow.
Then when price returned downwards, that area on the chart was filled quickly. So just like a Real Gap, this gap also has the tendency to get filled. Since the price action associated with this type of gap is less sudden, the fill should also have less force. Therefore, if you do take these types of trades, it is better to target fewer pips than with a Real Gap. Again, test it out and see what works best for you. At the end of the day, it is up to you to decide on the gap trading method is best for you.
Finally, remember that we don't trade in a vacuum. Always take into account current economic and geopolitical conditions, as well as upcoming news announcements. To learn more about gap trading strategies, you can do a lot Googling, or you can simply take a course from one of the price action traders on my list. Once you learn a method to test, be sure to fire up Forex Tester 2 and a demo account to test it extensively before you ever put real money on the line.
Several traders that I have talked to trade gaps quite successfully, so it is certainly worth the time to try to figure them out and work them into your trading quiver. Hi, I'm Hugh. I'm an independent trader, educator and researcher. I help traders develop their trading psychology and trading strategies. Learn more about me here. Skip to primary navigation Skip to main content Skip to footer Forex Gaps: Trading the Long Lost Trading Gap If you have always thought that gaps on the chart were too unpredictable to trade, this post might convince you otherwise.
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Send Cancel. Gap trading can be an effective trading strategy that you can add to your arsenal. They are easy to spot and can be traded with a rule based system. I'm going to skip the normal, definitions that you can read on any other website. Hopefully these definitions are more practical.
They are the way that I like to think of them. The obvious type of gap is well, an actual gap in price. You will typically see this when the market opens on Sunday, after there has been some big news over the weekend. This was what the price action looked like when the situation in Greece was still up in the air.
As you can see the gaps were fairly significant. If you were in a long trade over the weekend, you could have lost money when the markets opened on Sunday. We see gaps when surprise news comes out, or if there is a lot of economic activity over the weekend.
Traders want to capitalize on the events and suddenly move the market in one direction. These are some of the ways that you can choose to trade a gap. There are other ways to do it, but these are the most commonly taught methods. The most common way to trade a gap is to assume that it will get filled at some point.
In other words, you would enter the trade when the gap appears and target some point inside the gap. Some traders target half the gap, just to be safe, while others target the whole gap. The method you choose will depend on the pair you are trading and what your testing has told you works the best.
Where to set the stop loss isn't as clear and will take some testing and experimentation. So if your target is pips away from your entry, you would set your stop loss at 50 pips. A gap tends to get filled because the market wants to bring price back into balance after such a large imbalance. When the gap doesn't get filled right away, or it doesn't get filled completely, you could have a major followthrough on your hands.
Another way to trade a gap is to trade the price action after the gap is filled. Some traders assume that it will act as an area of support or resistance and that price will continue to move in the direction of the gap. So you would wait for the gap to be filled, before entering the trade. In this example, it worked out well and price rocketed back up, after the gap was filled. To trade this method, you would have to judge the strength of the trend and make a call on a continuation.
Instead of a physical gap, price simply moves very quickly through a price range. This is a concept that I learned from Chris Lori. Since there is actually price action through this price range, I consider it a Pseudo Gap.