When a market gaps higher or lower at the open, it shows a significant decision made by the trading public overall. This means that there simply weren’t enough people on the other side of the trade to absorb the pressure immediately. Because of this, it shows that an extreme attitude change has either just been had, or perhaps we have shown a confirmation of an overall trend. Gaps are very rare in the Forex market. The typically can only happen on a Monday open, and only after a major of that. However, and other markets they are much more common. For example, stock markets gap quite often, and this gives us an opportunity to make money on momentum. In the attached daily chart of IBM, you can see that there were a couple of significant gaps to the downside. This shows that there were so many people willing to sell this stock that we had to gap lower to find people willing to take the other side of the trade. This shows a significant change in attitude. When you pair these gaps with the 20-day simple moving average, it shows you which direction you should be trading. Quite often, people will sell at the open on a gap, and then put their stop loss on the other side. As far as taking profit, that can be done in almost any way imaginable, as this trade typically will be more of a longer-term deal. As you can see, we have gapped a couple of times since then in IBM, as a continues to unwind. By paying attention to these signs, you can be on the right side of the market. In the stock market, it’s quite common for traders to move their stop losses to the next gap if we get another one, just as we have seen on this chart.