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Common Gap Forex Pattern

Common gaps have the least technical significance of all the types of gaps. They do not indicate a trend start, continuation, reversal, or even a general direction of the currency other than in the very short term. Common gaps tend to occur in relatively quiet periods or in illiquid markets.

When price gaps occur in illiquid markets, such as distant currency futures expiration dates, they must be completely ignored. The entries for distant expiration dates in currency futures are made only on a closing basis, and they do not reflect any trading activity.

Never trade in an illiquid market because getting out of it is very difficult and expensive. When gaps occur within regular trading ranges, the word on the street has been that, "Gaps must be filled.".

In other words common gaps are short term. When currency futures open higher than yesterday's high, they are quickly sold, targeting the level of the previous day's high.


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