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New Week Opening Gap (NWOG): Definition, Trading, PDF Guide

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Hello traders! Today, let’s explore the concept of the New Week Opening Gap, often called the NWOG. This is a simple yet powerful idea that can help both new and experienced traders spot potential opportunities in the market.

What Is the New Week Opening Gap (NWOG)?

The NWOG is the price gap that happens between the market closing on Friday evening and opening on Sunday evening. Since trading stops over the weekend, any big news or events can cause the price to jump up or down when the market reopens. This jump creates a gap on the price chart.

Why Do NWOGs Occur?

Even though the trading stops, the world keeps turning. Events like political changes, natural disasters, or important economic news can happen over the weekend. When the market opens again on Sunday, it adjusts to these events, and the price can be different from where it closed on Friday. This difference is the NWOG.

How to Identify the NWOG

Finding the NWOG on your chart is easy:

  1. Mark Friday’s Closing Price: Note the last price before the market closed on Friday (around 4:59 PM EST).
  2. Mark Sunday’s Opening Price: Note the first price when the market opens on Sunday (around 6:00 PM EST).
  3. Highlight the Gap: The space between these two prices is the NWOG.

This gap is sometimes called a “liquidity void” because no trading happened during the weekend to fill it.

Identify the ICT New Week Opening Gap

Why Is the NWOG Important?

The NWOG often acts like a magnet for the price. That means the market may move back to fill this gap. Traders watch NWOGs because they can act as important levels where the price might reverse or continue its move.

Trading the NWOG

Here’s how you can use the NWOG in your trading:

  • Support and Resistance: The NWOG can act as a support level if the price is above it or a resistance level if the price is below it.
  • Price Retests: The market often retests the NWOG before continuing its trend. Watching for these retests can offer trading opportunities.
  • Lower Timeframes: After identifying the NWOG on a higher timeframe (like the weekly chart), switch to lower timeframes (like the 15-minute chart) to look for entry signals.

Consequent Encroachment of NWOG

The Consequent Encroachment is the midpoint (50%) of the NWOG. This level can be very reactive, meaning the price might bounce or change direction here. To find it:

  • Use a Fibonacci retracement tool set to 0, 50%, and 100%.
  • Apply it from the low to the high of the NWOG.
  • The 50% level is the Consequent Encroachment.

Using NWOG with Market Bias

Before trading the NWOG, it’s important to have a market bias—are you bullish (thinking the market will go up) or bearish (thinking it will go down)? Here’s how to use NWOG with your bias:

If You’re Bullish:

  • Price Above NWOG: Wait for the price to pull back to the NWOG. If you see signs that the market is turning back up on lower timeframes (like a market structure shift), you might consider buying.
  • Price Below NWOG: The NWOG may attract the price upward. Wait for the price to move above the NWOG and see if it acts as support before buying.
Using NWOG with Market Bias

If You’re Bearish:

  • Price Below NWOG: Wait for the price to rise up to the NWOG. If it shows signs of turning back down on lower timeframes, you might consider selling.
  • Price Above NWOG: The NWOG may attract the price downward. Wait for the price to move below the NWOG and see if it acts as resistance before selling.
Using NWOG with Market Bias

Keeping Track of Multiple NWOGs

It’s helpful to mark at least four recent NWOGs on your chart. These gaps can serve as reference points for where the price might find fair value. They can act as support and resistance levels and show areas where the price might react in the future.

Final Thoughts

The New Week Opening Gap is a straightforward concept that can give you insights into market movements at the start of the week. By understanding and watching these gaps, you can enhance your trading strategy and make more informed decisions.

Happy trading, and always remember to manage your risk carefully!

Frequently Asked Questions (FAQs)

What causes the New Week Opening Gap in the market?

The NWOG happens because the market is closed over the weekend, but events like political news, economic changes, or natural disasters can occur. When the market reopens on Sunday, it adjusts to these events, leading to a gap between Friday’s closing price and Sunday’s opening price.

How can I use the NWOG to improve my trading?

You can use the NWOG as a key level for potential support or resistance. By watching how the price interacts with the NWOG, you can look for trading opportunities. For example, if the price retraces to the NWOG and shows signs of reversing, it might be a good time to enter a trade in the direction of your market bias.

What is the Consequent Encroachment, and why is it important?

The Consequent Encroachment is the 50% level of the NWOG. It often acts as a significant point where the price might react strongly. Traders watch this level for potential entry or exit points because the price may bounce or reverse here.

Why should I mark multiple NWOGs on my chart?

Marking several NWOGs on your chart gives you more reference points for potential support and resistance levels. These gaps can influence future price movements, so keeping track of them helps you anticipate where the price might react.

Can the NWOG be used with other trading tools and strategies?

Yes! The NWOG can be combined with other technical analysis tools like trend lines, moving averages, and indicators. Using it alongside other strategies can provide additional confirmation for your trades and help improve your overall trading plan.

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