Gap Trading Strategy for Silver Daytraders
The price gap is a very common phenomenon in silver. Professional day traders wait patiently for the price gap in silver since they know that trading the gap in silver is extremely reliable and profitable. Some of the best ways of trading these assets is through the forex trading tools at EasyMarkets, which has some of the most efficient offerings in these areas.
The gap in the silver market usually occurs after a major economic news release or in the new opening of the market. In order to trade the gap, the minimum pip gap of silver should be 80 pips. Trading the gap can be very intimidating for silver since it requires some wave formation knowledge.
Let’s see an example of gap trading technique in Silver:
Figure: Trading the silver with gap trading strategy
The strategy requires the strong knowledge of higher high, higher low, lower low and lower high terms used in trend formation. First of all, the traders find a decent gap in the market in the direction of the trend. After that, they wait patiently for the market to create a new lower low in the chart. The new lower low in silver indicates that price is nearly bottomed out and ready to shot up.
A valid gap trading strategy will have new higher low right after the formation of new lower low. Once the new lower low and new higher low is created in the market traders assume that the price has finally capped its downward movements and ready for a decent breakout.
Traders use the modified RSI indicator with a new value of the period which is set to 5.Once the price breaks the new higher low in the market they look for a valid break in the RSI 70 level. If the signal line in the RSI indicator breaks the 70 level traders take their long entry and ride the new bullish trend till the momentum fades out. Professional day trader uses tight stop loss which just below the recent new lower.