A gap occurs when the opening price is above or below the previous closing price, with no trading activity in between.GAP is named based on its location. It is named based on its nature, whether in zone or out of zone.
Four types of GAPS based on location of the GAP are 1. Area GAP 2. Breakout GAP 3. Runaway GAP 4. Exhaustion GAP .GAP does not forecast the positive or negative direction of the trend. Rather, it indicates whether the existing trend has strength or not. It helps us to locate current phase of the trend. It appears due to difference in trading range.
A gap generally is a non-traded zone which is impacted by global cues or global support.
BY GAP analysis we can find the strength of the trend
IT also helps us to locate the phase of the trend (i.e. the trend is in the initial /boom /end stage).
GAPS appear on charts when there is an important event or news occurs which affects the security. Overnight risks occur when a news or event which affects the security occurs after closing of the market. It has gap impact on the price of security on the next trading day.