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08.09.2019


AAKASHAYA PATRA SEVEN STAR SMART EDUCATION SERIES PART – 24 

Gap And Gap Analysis

What is Gap?

A gap is an area on a price level on a chart where no trading occurred. This type of gap can occur in any time frames but, for swing trading, we are mostly concerned with the daily chart, weekly chart.
A gap forms on a chart when the stocks opens higher or lower of the previous candle‘s closing price.

Why would this happen?

Lots of reasons can cause this, such as an earnings report coming out after the stock market had closed for the day. If the earnings were significantly higher than expected, many investors might place buy orders for the next day. This could result in the price opening higher than the previous day's close.
This happens because buy or sell orders are placed before the open that cause the price to open higher or lower than the previous day's close.
If the trading that day continues to trade above that point, a gap will exist in the price chart. Gaps can offer evidence that something important has happened to the fundamentals or the psychology of the crowd that accompanies this market movement.
Gaps appear more frequently on daily charts, where every day is an opportunity to create an opening gap. Gaps can be subdivided into four basic categories:


 Common gap
 Breakaway gap
 Runaway/ Continuation gap
 Exhaustion gap
 Island Cluster

Some gaps are caused by events and should be ignored:

 Ex-dividend gaps occur as price adjusts on the day after a dividend becomes payable;
 New share issues; and
 Expiry of futures contracts

FOR MORE SUCH TYPE OF EDUCATION JOINT OUR ONLINE SERIES AND BATCHES AND BE A PRO TRADER CONTACT ON 7028 421 786.




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