Measuring Gap Forex Trading Strategy
The measuring gap forex trading strategy is a trading strategy that explains the formation of a gap in the middle of a trend.
The measuring gap is also tagged Runaway gaps and is used to illustrate the determination of the market to join a fat-moving trend.
Measuring gaps are essentially used to drive trends. The strategy combines the Buzzer (24) and Bulls MT4 indicator in delivering buy/sell signals.
MetaTrader4 Indicators: Buzzer (20), Bulls (color modified)
Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours
Recommended Trading Sessions: Any
Currency Pairs: Any
Buy Trade Example (Click the picture for full size view)
Long Entry Rules
Place a buy position if the following chart or indicator pattern are in place:
- If a measuring gap forms on the activity chart, it is suggestive that it does so at the middle of the trend and for this reason we have plotted three horizontal lines of the chart to measure our presumed start point, highest point reached before the measuring gap formed and we were able to set out a target price (1.3445).
Hence place a buy at the close of the candle that trails the measuring gap.
- If the Bulls custom indicator forms LawnGreen vertical bars above the 0.00 level, it is a trigger to buy. More so, if the vertical bars of the Bulls custom indicator depicts extreme volume as shown on Fig. 1.0, it indicates urgency in the market.
- The lime colored line of the Buzzer (20) custom indicator with price mostly trading above the line is an indication that price is bullish.
Stop Loss for Buy Entry: Place stop loss below immediate support.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit on position(s) if the following chart or indicator pattern are in display:
- The measuring gap suggest that it forms at the middle of a trend and having measured our presumed takeoff price for the bullish trend, the highest point reached before the gap was formed, we were able to project 1.3445 as our target price. If price touches this level, it is wise to exit or take profit accordingly.
- If the Bulls custom indicator forms vertical bars below the 0.00 level, it is an indication that price is on its way down i.e. an exit or take profit is advised.
- If the line of the Buzzer (20) custom indicator turns red, it is a trigger to exit or take profit as the case may be.
Sell Entry Rules
Enter a sell in the market if the following chart or indicator pattern are in display:
- If a gap forms during a downtrend, it is indicative that the gap is formed at the middle of the trend and price is expected to dive further downward.
- If the Bulls custom indicator forms below the 0.00 level, it depicts a bearish signal.
- If the Buzzer (20) line turns red with price most likely trading below the line, it is a sell alert.
Stop Loss for Sell Entry: Place stop loss above immediate resistance.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following conditions or rules are visible on the activity chart:
- If the target price is reached based on the measuring gap take profit projections – exit or take profit.
- If the vertical bars of the Bulls custom indicator realigns above the 0.00 level, an exit or take profit is appropriate.
- If the line of the Buzzer (20) custom indicator changes color to lime, it is a trigger to exit or take profit.
About The Trading Indicators
The Bulls indicator is designed to show the underlying strength of an existing trend.
The Buzzer custom indicator is designed from modified moving averages. Bullish triggers are seen when its line turn lime with price forming above it, while bearish triggers are displayed when the line turns red with price mostly aligning below the line.