Trade: Close the gap.
This is the 3 hour chart for the Euro. It opened on Sunday about 130 pips higher than Friday's close. I have traded forex almost every trading day for the last three years and I don't remember seeing such a huge gap.
The close on Friday (4/12) was 1.3500 and by the following Friday (4/19) the gap was closed. What made this a good trade, however, was the Price Action.
Here is one of my favorite entry signals:
Notice the first three candles: Green candle followed by another green INSIDE candle followed by a red candle. The first and 3rd candles have nice long wicks. The fourth candle gives us confirmation by opening inside the Bollinger Band (resistance in this case) to short the trade. It went for almost 70 pips before retracing. I would have preferred that the 3rd (red) candle was an Outside candle, but the 4th candle opening within the BB was good enough.
If you wanted to play the gap, a natural stop would have been just above the wick on the 3rd candle and riding out the gap back to the 1.3500 for about 130 pips. Not too shabby.
Many good trades this week but not enough time to review them all. I'm going to try to do this daily and with audio. Stand by.
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