Gaps are very important "indicators" within the market.
Outside of the weekend gap that is typically seen by all FX market participants, gaps that occur during the weekday are not all created equal. The reason is obvious. Not all trading platforms are create equal. Each retail trading platform is based on the broker's contractual arrangements with its liquidity providers.
In addition, most retail FX brokers are classic Bucket Shop operations and that will produce dissimilar pricing from platform to platform. So, where one broker's platform might show an M1 gap of 3 pips, another broker's platform may show no gap at all. The higher the time frame, the less likely you will see dissimilarities in gaps from platform to platform. This is also easy to understand.
Higher time frames (by definition) can absorb a greater amount of price discrepancy from platform to platform - simply because there is more time to instantiate and register a tick. So, broker #1 might show an M5 gap of 5 pips, while also showing an M15 gap of 1 pip right at the close of the M15 bar. At the same time, broker #2 might show a smaller M5 gap of 3 pips, while showing no gap on the close of the same M15 bar. The M15 being 300% larger than the M5 bar, allows more time for tick instantiation.
Trading gaps is possible, but you have to trade the right kind of gaps and you have to do it using the correct time frame. Otherwise, the dog ends up chasing his tail and the drawdown phase before gap closure can be brutal and unpredictable. The behavior of Price around certain types of gaps are key to understand, before one can consider such trading as bread & butter.
Certain kinds of Gap Scalping can also be done with consistency - usually down at the M1 time frame and in conjunction with a market containing high levels of momentum in on direction or the other.
In Horizontal Markets (what I classify as a Type II Market), gap trading can be very profitable, where the profitability factor is heavily dependent on channel size, channel stability and low probability for the emergence of what I call the Type III Market (the Transverse Market).
Some of the biggest a most successful Inter-Day trades that I have ever made, came from Gap Signals.
