Gap analysis is an essential tool of technical analysis.it is an area of discontinuity where no trading takes palce. It appears on chart when there is important news or event which affects the security. Overnight risks can occur due to these events, and can be seen in next trading day. It indicates strength. Gap is named depending on its nature and where it gets formed. There are 4 types- Area gap, Breakout gap, Runaway gap and exhaustion gap

  • : Gap is an area discontinuity in the chart, where no trading takes place. it indicates strength .It appears due to difference in trading range
  • : Gap are given name depending upon where in chart it is formed and nature. There are 4 types- -Area gap, Breakout gap, Runaway gap and Exhaustion gap
  • : Gap appears on charts when there is important news or events which affects the security. Overnight risks occur due to the news or event which affect the security occurs after closing the market.it has gap impact on the price on the next trading day.
  • : Area gap occurs inside the trading range. Area gap may be filled in the near term. -volume is geneally low
  • : It occurs when price gives breakout from its trading range Area gap may not be filled Volume should be high -Its an indication of beginning of new trend
  • : Its formed after a breakout gap. -this area may not get filled in near term -volume is distributed evenly throughout the day The close should be near to its day high - it may extend the rally due to unwinding of existing position -price moves faster
  • : This gap appears after a runaway gap ,but if it gets filled on the same day, then it is considered as exhaustion gap. -The close should be near its day low -Volume should be high -shows termination of existing trend Its difficult to spot as it forms in the morning and gets filled by evening , so we should know to read candlestick charts
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