Gap trading strategies help traders capitalize on the gaps in charts caused by price fluctuations between sessions. Read on to discover more about the phenomenon of gaps, the four types to be aware of, and how to employ a gap trading system.
What is a gap?
A gap refers to the area on a chart where no trading activity has taken place. This will appear as an asset’s price moves sharply up or down with nothing in between, meaning the market has opened at a different price to its prior close.
The four types of gaps in trading
3. Continuation or runaway gaps show an acceleration of an already bullish or bearish pattern in the same direction. This can be caused by a news event that confirms the sentiment and furthers the trend. Traders might look to follow the trend and place a stop just below the gap for a bullish runaway gap and just above for a bearish runaway gap.
What does it mean when a gap has been ‘filled’?
Trading the gap: Gap trading strategies & tips
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