Price gaps are the simplest of technical indicators, but that doesn't mean properly analyzing them is easy. There are several types of gaps and they have entirely different implications for the market. The technical study of price gaps provides information regarding future price direction and move duration. As John Murphy defined in Charting Made Easy, gaps are "simply areas on the bar chart where no trading has taken place." An upside gap is formed when a following low price is higher than a previous high. For a downside gap, the following high is lower than the previous low. The gap direction (upside/up or downside/down) is the price direction forming the gap. A gap's price range determines its size. A gap's volume is the trading volume on its day of formation.
展开▼
