Stocks & Commodities V. 34:13 (24–26, 36): Four Gaps And Their Technical Significance by Phillip Duke, PhD

Four Gaps And Their Technical Significance by Phillip Duke, PhD

Gaps can help or wreak havoc on your trading. Here we show you how you can recognize four different types of gaps, the sentiments associated with them, and how to employ them.

The four different types of gaps are initiation, continuation, trading, and exhaustion gaps; the gap type depends on the sentiment that created it. Technical analysis of a trading position includes identification of gaps and determining and evaluating the sentiments that created them. An upside trading gap occurs when there is no trading between the prior day’s high and the succeeding day’s low; a downside trading gap occurs when there is no trading between the prior day’s low and the succeeding day’s high. Bar and candle charts show gaps as blank price space...