Trading the Gap: What are Gaps & How to Trade Them?

Read on to discover more about the phenomenon of gaps, the four types to be aware of, and how to employ a gap trading system.A gap refers to the area on a chart where no trading activity has taken place. This will appear as an asset’s price moves sharply up or down with nothing in between, meaning the market has opened at a different price to its prior close.

Why does the gap occur? The most frequent cause is fundamental factors. For example, in the chart above, ASOS stock rallied overnight as the company’s full year results showed it avoided another profit warning - along with traders showing confidence in the company’s ability to fix critical operational issues.

Other news such as product announcements, analyst upgrades and downgrades, and new senior appointments can lead to gaps. This is because they can move the market significantly between trading sessions in either direction.Gap down stocks and gap up stocks refer to the direction of the price movement either side of the gap. A full gap down is when the opening price is lower than the prior low price, while a full gap up occurs when the opening price is greater than the prior high price.

Irrational exuberance from less experienced traders can be particularly advantageous for more seasoned market practitioners when it comes to fading the gap, as the volume that causes the gap is often caused byIf technical or fundamental factors point to the potential for a gap on the next trading day, it may be time to enter a position. For example, having detailed knowledge of a given company and its operations can help a trader predict a gap for that stock ahead of an earnings report.

Finance Finance Latest News, Finance Finance Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

European markets set to start the new trading week on a positive noteEuropean stocks are set to open in positive territory on Monday, with regional markets still seeing a boost from last week's U.S. inflation figures. Here we go again. Trying to entice investors in. What is it with you CNBC? Give a legit reason for your comment. A Fed governor in Australia said today the hike in markets may be premature. What don’t you get?
Source: CNBC - 🏆 12. / 72 Read more »

Lakers Still Interested In Trading For Bojan BogdanovicLakers Still Interested In Trading For Bojan Bogdanovic - RealGM Wiretap lesss goooo Of course lol Thoughts?of course we have to move other pieces to make room as well.
Source: RealGM - 🏆 580. / 51 Read more »

Sam Bankman-Fried’s Unceremonious Exit Leaves ‘Alameda Gap’ in Crypto MarketsAccording to Kaiko, amid the collapse of Sam Bankman-Fried’s trading firm Alameda Research, the drop in crypto liquidity over the past week is far larger than in any previous market drawdown. _jocelynyang_ reports _jocelynyang_ SHEESH!!! 🫣〽️🩸 _jocelynyang_ This happened bc people buy on margin and sell short. If yiu were only allowed to buy what u can afford, whether u were Joe Schmo or a hedge fund, none of this would happen. This is what happens in the stock market/short covering. Simpletons wonder why
Source: CoinDesk - 🏆 291. / 63 Read more »

Crypto trading site FTX under federal investigation amid bankruptcyThe collapse of cryptocurrency exchange FTX is now the subject of an investigation by federal prosecutors in New York, sources familiar with the matter tell ABC News. Maybe federal prosecutors should be investigating how we got here .again
Source: ABC - 🏆 471. / 51 Read more »