After spending sometime in the trading
platform, we may stumble upon a chart who possess an empty space that
somehow depicts a broken line. A missing part supposedly embedded in
our chart which will fulfill the empty space and may produce a lot of
confusion among newbies. That space is called Gap.
Gap is defined as a break between
prices on a chart which happens once a price makes a significant
movement, either upward or downward, without any trade occurring on
those moments. It is due to several factors such regular buying or
selling pressure, a sudden change in the outlook of the analysis, or
some other type of news release. So far in my research, I managed to
gather 4 types of gaps: Breakaway, Common, Exhaustion, and lastly
Measuring.
Breakaway gaps- these gaps
usually happens when prices break away from a congested area.
Common gaps – usually occurs
between the support and resistance level in the event that the market
is moving sideways.
Exhaustion gaps – commonly
takes place when the market is already exhausted and the existing
trend stops. But it must not be mistaken as a trend reversal.
Measuring gaps – often formed
halfway of a price move either in a quick advance or decline.
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