Basic of Gap theory(Common gap, Breakaway gap, Runaway, Exhaus )Gaps can offer evidence that something important has happened to the fundamentals or the psychology of the crowd that accompanies this market movement.
Gaps can be subdivided into four basic categories:
• Common gap
• Breakaway gap
• Runaway/ Continuation gap
• Exhaustion gap
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--> Common gap-:
Common gaps generally occur uneventfully or when there is nervousness among the investor and has low volume , generally gap is filled in the future .
--> Breakaway gap( Measuring gaps )-:
A breakaway gap is those which have high Volume and the chances are more to cover the gap . The traders who have invested in the wrong side need to cover them. A new change in the market has taken place. The point of news breakout becomes support or resistance.
--> Runaway gap-:
runaway gap has increased in liquidation and those who are holding the position will get panic and sell/buy. the runaway gap is caused by the trading limit imposed by the exchanges.
--> The exhaustion gap ( Island-cluster )-:
exhaustion gap happens near the end of the movie. Mainly have a high volume and have a large difference from the previous price, in this state of panic long down move is transpire due to a feeling or belief that bad things will happen. exhaustion gap quickly fills a gap when price reverse.
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