Gaps are an important part of technical analysis as different gaps have a different story to tell. Gaps usually happen when there is an underlying fundamental or technical factor which has not been absorbed by the stock till that time. There are 4 types of gaps
Area gap, Breakout gap, runaway gap and exhaustion gap. Area gap appears in a non trending zone, breakout and runaway gaps appear in a trending zone and exhaustion gap appears at the end of the trend. Volume info is an important tool to confirm the momentum and trade likewise.
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Hi,
The reasons for area gap creation can be a positive news release by the company or public announcements of the company’s profit while the gap usually appears in a trading range by low volume and the gap usually get filled fairly quickly.
Thank you for the answer. But if an area gap appears with high volume then how must the trade be executed?