Strategy based on gaps
Recommended timeframes M5
This trading strategy is designed to work with CFD; however, we are going to apply it to the contract for difference on shares of American International Group, Inc. (instrument AIG). For this strategy it is preferable to choose time when the market is the most active; the best time to start trading is the moment of opening of the American session.
Short or long positions can be opened upon the following conditions:
1. There was gap at the opening of the American session.
2. Gap was at least 10 points.
Take Profit: from 40 points.
Stop-Loss is set at the closing price of the previous day.
An example of opening a sell positions is shown on figure 1:
Fig 1
An example of opening a buy position is given on the figure 2: