Stocks & Commodities V. 33:12 (24–26, 33): Gap Trading by Kevin Luo
Do exhaustion gaps really fade? Here’s a study that creates and tests an exhaustion gap prediction technique using two measurable factors: stock trend and gap size.
A price gap is a price range in which no trading takes place. An upside price gap occurs when today’s price range is above yesterday’s high price. A downside price gap occurs when today’s price range is below yesterday’s low price. It is easy to spot price gaps on bar charts. According to the statistics from this study, the typical US stock generates 18 price gaps on average, annually. The average gap sizes are 1.62% for upside gaps and 1.72% for downside gaps...