Forex Gap Strategy

Forex Gap Strategy — is an interesting trading system that utilizes one of the most
disturbing phenomenons of the Forex market — a weekly gap between the last Friday's
close price and the current Monday's open price. The gap itself takes its origin in the fact
that the interbank currency market continues to react on the fundamental news during the
weekend, opening on Monday at the level with the most liquidity. The offered strategy is
based on the assumption that the gap is a result of speculations and the excess volatility,
thus a position in the opposite direction should probably become profitable after a few
days.
Features
· Regular trading with clear rules.
· No stop-loss hunting or premature hits.
· Statistically proven profit.
· You have to open position at the week's beginning and close it right before the
end.
How to Trade?
1. Select a currency pair with a relatively high level of volatility. I recommend
GBP/JPY as it showed the best results during my tests. But other JPY-based pairs
should work too. By the way, it's a good strategy to use on all major currency
pairs at the same time.
2. When a new week starts look if there is a gap. A gap should be at least 5 times the
average spread for the pair. Otherwise it can't be considered a real signal.
3. If Monday's (or late Sunday's if you trade from North or South America) open is
below the Friday's (or early Saturday if you trade from Oceania or Eastern Asia)
close the gap is negative and you should open a Long position.
4. If Monday's open is above the Friday's close the gap is positive and you should
open a Short position.
5. Don't set a stop-loss or a take-profit level (it's a rare occasion but stop-loss isn't
recommended in this strategy).
6. Right before the end of the weekly trading session (e.g., 5 minutes before the end)
you need to close the position.
Example
You can see GBP/JPY pair's last 7 weeks (as of May 24, 2010) and all of them have gaps.
6 out of 7 gaps give correct signals that result in a lot of profit. The last gap gives a
wrong signal and yields a medium loss. The average spread for GBP/JPY was 3 pips
during the example period and all gaps were much wider than 15 pips, making them all
qualifying signals. The net total profit was 1,612 pips in 7 weeks — not that bad.
Warning!
Use this strategy at your own risk. Austin Winston can't be responsible for any losses
associated with using any strategy presented on the site. It's not recommended to use this
strategy on the real account without testing it on demo first.
Look this images