Gap (chart pattern): Difference between revisions

Revision as of 13:01, 19 July 2011

Revision as of 13:10, 19 July 2011

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In an upward [[Market trend|trend]], a gap is produced when the highest [[price]] of one day is lower than the lowest price of the following day. Thus, in a downward trend, a gap occurs when the lowest price of any one day is higher than the highest price of the next day.

For example, the price of a share reaches a high of $30.00 on Wednesday, and opens at $31.20 on Thursday, falls down to $31.00 in the early hour, moves straight up again to $31.45, and no trading occurs in between $30.00 and $3031.9900 area. This no-trading zone appears on the chart as a ''gap''.

Gaps can play an important role when spotted before the beginning of a move.