InstaForex

Monday, October 22, 2012

Inside Trade | A Broken Link - Gap


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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