Dow theory and price patterns can identify the trend and price movement. Gap helps us to under stand to strength of the trend and price movement to rally or fall.

Gap can help us to understand the phase of the trend, like beginning of trend, broken out running away of termination of trend.

It appears due to difference in trading range

Some to the gaps discussed includes

area gap
breakout gap
runaway gap
exhaustion gap

  • : Dow theory and price patterns can identify the trend and price movement. Gap helps us to under stand to strength of the trend and price movement to rally or fall. Gap can help us to understand the phase of the trend, like beginning of trend, broken out running away of termination of trend. It appears due to difference in trading range
  • : We have to identify where the gaps appears and qualify it for the below gaps base on the conditions Area gap breakout gap runaway gap Exhaustion gap
  • : Gap appears due to difference in price range. 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.
  • : Area gap appears when the market is moving sideways. Its a non trending zone. We can expect this gap to be filled. We cannot say much about this gap, who is powerful seller or buyer. We have to ignore this gap. In case the gap is not filled, it gives a early signal of a negative or positive trend
  • : Break out gap signifies the beginning of a new trend. It happens on a non trending zone Volume should be very high during breakout day. We can expect this gap to be open for some time
  • : Runaway gap happens in a trending zone. Its happens after the breakout gap in the same direction. It signifies that the sellers are closing the position to minimize the lose. we can expect the volume to be low and close price is as close to the highest for the day. We cannot expect the gap to be filled immediately, It also signifies the trend is stronger and can go further.
  • : Exhaustion gap appears during a trending zone when the prices are going up, this gap appears and it may get filled in the same day. hence its difficult to identify unless we know candle sticks better. It signifies that due to some market news, buyers felt its the time to close their positions, it creates this major selling pressure.
1 Comment
  1. Naresh 3 years ago

    Hi,
    Thank you for sharing the detailed information with us

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