Brad Alexander
FX Large Limited
In Acuity Trading’s continuing series of educational videos, today we want to take a look at Gap Trading.
If you’re not familiar with it, this is what a gap looks like.
You might find these when the markets open Monday morning in Auckland or Sunday night in London when something dramatic has happened over the weekend. As we have seen, this could result from an opinion poll that caught an entire nation off guard, a geo-political event, or news from a central bank. These are not restricted to weekends, of course, but they are rare during the week.
In trading however, there is an expression that goes, “Gaps always get filled” That is to say that price will always retrace to return to pre-gap levels.
Does this really happen? Very often, it does. If we take a look at a few examples, we see that it’s often true. USDCAD, USDJPY, Cable, here’s another Cable, and EURGBP. But, what about this one? This price action on another EURGBP from earlier in the year showed no sign of returning to the downside. So? What makes this one different from the others? Simple! Support and resistance.
In all these successful cases, price was within and bounced off support or resistance and you would want to enter the trade on a confirmation of the bounce.
In the case of EURGBP the gap was actually well above this previous line of resistance which very quickly became a line of support.
Here we have a couple of weekend gaps in Sterling. Cable had just experienced a huge surge thanks to a very bad Non-farm Payroll report but on Saturday a negative poll was released having it open much lower and heading south. News sentiment on GBPUSD had been neutral for a few days so that wasn’t giving us a hand.
However, the situation on EURGBP on the same day was different. It had been on a bullish run for a few days and the gap just helped it along the way with News Sentiment showing bullish confirming the run. When the run hit resistance, News Sentiment shifted dramatically and we were confident selling EURGBP.
Here is another case with USDCAD. Price kept rising until it hit a line of resistance which was a previous line of support. By the time this double top had formed, News Sentiment had turned to bearish and we were confident going short. The gap was filled and more.
So to summarise:
1. Does Price fill All Gaps?
2. Probably: as long as you pay attention to support and resistance
3. and you use shifts in news sentiment to confirm your entry
While we may offer market commentary based on fundamental or technical analysis, we do not offer trading advice and cannot be held liable for any decisions taken by viewers and readers of our material.
Editors’ Picks
EUR/USD risks a deeper drop below 1.1750
EUR/USD keeps its vacillating mood in place as the the NA session drwas to a close on Tuesday, hovering below the 1.1800 hurdle amid acceptable gains in the US Dollar. In the meantime, market participants and the FX galaxy are expected to closely follow President Trump’s SOTU speech around 2AM GMT.
GBP/USD regains 1.3500 and above
GBP/USD extends its advance for the third day in a row on Tuesday, this time retesting the area beyond the 1.3500 hurdle. Cable’s uptick comes despite decent gains in the Greenback and the dovish message from the BoE’s Bailey at the UK Parliament.
USD/JPY climbs to 156.00 area as markets doubt BoJ rate hikes
USD/JPY catches a fresh bid wave and challenges the 156.00 region on Tuesday. The pair rallies as the Japanese Yen (JPY) falls hard on reports that Japan's PM Takaichi voiced concerns to BoJ Governor Ueda on interest rate hikes.
Editors’ Picks
AUD/USD remains capped by 0.7100, focus on inflation data
AUD/USD shrugs off Monday’s pullback and regains composure on Tuesday, coming close to the 0.7070 region despite the Greenback trading with modest gains ahead of the opening bell in Asia. In the meantime, the Aussie Dollar should remain under scrutiny in light of the publication of critical inflation data in Oz early on Wednesday.
EUR/USD risks a deeper drop below 1.1750
EUR/USD keeps its vacillating mood in place as the the NA session drwas to a close on Tuesday, hovering below the 1.1800 hurdle amid acceptable gains in the US Dollar. In the meantime, market participants and the FX galaxy are expected to closely follow President Trump’s SOTU speech around 2AM GMT.
Gold appears offered around $5,150
Gold is giving back a good portion of the recent multi-day rally, receding to the $5,150 zone per troy ounce amid the decent bounce in the US Dollar and mixed US Treasuty yields. In the meantime, markets’ attention remain on upcoming comments from Fed speakers.
Ripple’s DeFi shift in focus: Navigating XRPL EVM sidechain growth, XRPFi migration and liquidity
Ripple (XRP) has continued to trade under pressure, extending its decline by approximately 63% from the record high of $3.66 in July. The remittance token is trading above support at $1.35, while its upside appears limited by key supply zones, starting with $1.40, at the time of writing on Tuesday.
The Citrini report: How a debatable AI narrative can shake Wall Street Premium
That AI-related headline alone was enough to rattle investors.US stocks slid sharply on Monday after a widely circulated Citrini Research memo outlined a hypothetical “2028 Global Intelligence Crisis”, warning that rapid AI adoption could push US unemployment into double digits as early as by mid-2028.
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