Gaps are tough in the Forex. Since the markets are open 24 hours a day, without breaks. Take a look on an “intra-day” time frame (64/32 minute) – if you see gaps on these bars, take note of the direction. If price is gapping in your direction, fine. If price is gapping opposite your bet, you may have an early sign of a change or pattern break. If you’re not in a positipon, but are planning an entry, use a “Rest-Pause” technique.
Here’s an example of how it works: You see a possible entry into the Pound / US dollar pair, you’ve calculated your risk, your profit targets are marked on the chart, and you are ready to pull the trigger. Then you look at the intra-day trading and see … gaps. Upside, downside, they’re all over the place! Now what you do is … wait. Hold your order for 3-5 minutes before actually calling your order desk or entering the order into your dealing desk.
This goes double for you intra-day traders. If you’re feeling like “I’ve just gotta get in before this gets away from me!”, You need to take your calculations, then Rest-Pause for 3-5 minutes. Your emotions will cool and you might find a few entries that were more wishful than high-probability. (A good kitchen timer can help to keep you more honest!)
A wide range bar is another good sign that your position is about to be overrun. First, you’ve got to know your average daily range. Second, you have to calculate your entry point (s) ahead of time. If you see daily bars exceeding the average range, expect your entry target to go to the full 1.618 extension.
Sometimes, you’ll see that the market is near a target for entry, and the 24 hour period closes at the extreme top or bottom. That is an indication of strength (close at the top) or weakness (close at the bottom). Expect to see several tail closes one after the other.
by Maceo Jordan