EURUSD - Do You Trade Gaps?Gaps can be powerful indicators for spotting potential price movements. They often represent areas where market orders overwhelm supply or demand, creating an imbalance.
In this chart, I’ve identified a clear gap (imbalance) on the EUR/USD 1-hour time frame, and I want to share my thoughts on how you can trade them effectively.
Why Gaps Matter:
Liquidity Zones: Gaps often act as magnets for price action. The market loves to "fill" these areas to rebalance orders.
Market Psychology: Gaps represent institutional activity where major players leave their footprint. Recognizing this can give you an edge.
Clear Risk Management: Gaps provide clear levels for stop-loss placement and entry zones, making your trade setups precise.
My Approach to This Gap:
Gap Identification:
On this EUR/USD chart, I spotted an imbalance near the 1.0433 area.
Confluence:
This gap aligns with my premium Fibonacci levels and is located in a significant bullish order block. This strengthens the validity of this setup.
Bias Confirmation:
After the gap formed, the price showed bullish intent, supporting my bias that the market could push higher to mitigate this imbalance zone.
How to Trade Gaps:
Be Patient: Wait for price to return to the gap area before entering trades. Impulsive entries can lead to unnecessary losses.
Combine with Structure: Always ensure gaps align with your broader trend and other technical tools (e.g., Fibonacci, BOS, CHoCH).
Risk Management: Use the gap edges to wdefine tight stop-loss levels and aim for a high reward-to-risk ratio.
Conclusion:
Gaps are not just empty spaces on the chart; they’re signals of what the market intends to do. In this case, if the price revisits the highlighted gap area, I’ll look for further bullish signs before entering a trade.
What are your thoughts on trading gaps? Have you used them in your strategy? Let me know in the comments below!
