Gaps
A gap occurs when a price series experiences an explosive jump either up or down between price bars. We usually refer to Gaps occurring on a daily or weekly bar basis. Gaps are essentially points of exceptionally high or low demand. The theory is that the pent-up buying or selling pressure that forms the gap in the first place will follow through with more buying or selling. For this reason, gaps are believed to be good indicators in a continuation of a move in the same direction.
There are four main types of Gap.
| Gap | Identification | Comment |
|---|---|---|
| Breakaway Gap | Occurs at the end of a move and goes in the opposite direction. | High significance and usually the easiest to identify and most profitable to trade. |
| Measured Gap | Occurs in the middle of a trend, ... |
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