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When gap is formed inside a trading range then this will be closed on the same or next trading days, so this has no significance and this is called as AREA GAP.
When a gap is formed outside a trading range and the trend is bullish with high volumes then this is called a breakout gap and this is time to buy and this is called a BREAKOUT GAP.
When a gap is formed in a bullish trend this is called a runaway gap and this has medium to high volumes and indicates newer price ranges and this is called a RUNAWAY GAP where long positions are taken.
When a gap is formed at the end of a trend say there is a bullish rally and when a gap is formed this signifies the end of trend and sellers tend to take upper hand and a sell signal if given and also a short sell signal is given. This gap is called EXHAUSTION GAP.
Area Gap: If a gap is formed in non-trending area, that is between demand and supply zone, it is area gap.
Breakout GAP: If a gap appears in trending area with high volume.
Runaway GAP: The GAP appears after the breakout and in bullish trend with significant volume.
Exhaustion GAP: The GAP is created at the start of the day but gets filled during the day, it is at the termination of trend.
Area Gap: If a gap is formed in non-trending area, that is between demand and supply zone, it is area gap.
Breakout GAP: If a gap appears in trending area with high volume.
Runaway GAP: The GAP appears after the breakout and in bullish trend with significant volume.
Exhaustion GAP: The GAP is created at the start of the day but gets filled during the day, it is at the termination of trend
GAPs are named based on the phase of a trend on which it appears.
- Area GAP – It appears in the non-trending area(between demand and supply zone). It is expected to get filled and has no effect.
- Breakout GAP – It appears during the breakout with high volume. It indicates the begining of a new trend.
- Runaway GAP- It appears during a rally after the breakout. It indicates the aggressiveness of the rally.
- Exhaustion GAP – It appears after a significant rally and gets filled on the same day. It indicates a trend reversal.
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