Binary Options Gap Strategy

Binary Options Gap Strategy

Submitted by adil on Thu, 02/19/2015 - 11:09

In the financial markets, there are many trading strategies and trading with Gap binary options strategy is just one of them. It can be counted among the advanced strategies as it follows a close economic calculator and price movements in significant economic events. Gap binary options strategy does not make use of any indicators and the trading signals occur only in a situation on the chart.

Understanding a price gap

In order to get the essence of how binary options gap trading works, we must first understand the meaning of a price gap. Price gap is a term which is used when a stock price dives away from its last price range. Technically, it is the breaks between prices on a chart when price sharply moves up or down with no trade occurring in between.

It should be kept in mind that price gaps can only be observed on a candlestick or bar charts and must not be looked for on point-and-figure or basic line charts.

Appearance of gaps on the chart

The gap appears on the chart as the market is always looking on closing the gap or trading session. Gap can be created by any unexpected buying or selling behavior or any other news and announcement and they normally occur between the closing of the market on one day and its opening on the next day.  

Location of a price gap on the chart

The price gaps are usually quite visible on the chart especially after holidays or important announcements or news. So when a price goes up or down because of a gap, the market tries to quickly fill it back in to finish that gap. This is because the market is always looking on taking care of the situation and closing the window.

Closing of a gap can occur very quickly after its appearance on the chart, hence leaving little time for trading in Gap binary options strategy. Even with this flaw, trading in gap binary options has many advantages. It does not require you to learn technical indicators and their application, all the information that you need is right there on the chart in the form of gaps.

Opening a position when a gap appears on the chart

What should you do when you observe the appearance of a gap on the chart? Should you wait until the gap unfolds and trades are open again? Yes something like that. What you need to do is wait for the appearance of a candle on the chart. If a reversal of candlestick pattern occurs and the price gap moves up, you can buy a Put option. But if the price gap comes down, you can buy a Call option.

Trading in gap binary options is fairly simple with no use of indicators or deep technical knowledge. You must, however, be experienced in locating the price gaps on important events. Although rarely seen in the forex market, price gaps are a regular occurrence in the binary option market and must be given special attention while trading.