A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release.



An example of two different gaps can be seen in the chart above. Notice how the stock closes the trading session before the first gap at $50 and opens the next trading day near $46 with no trading occurring between the two prices. Gaps are a regular occurrence in all financial markets. However, they are rarely seen in the forex market since it is highly liquid and trades 24 hours a day.

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  1. How effective is creating trade entries after spotting a Upside Tasuki Gap pattern?

    The upside tasuki gap pattern is a useful tool for creating an effective trade strategy because the mechanics and interpretation ... Read Full Answer >>
  2. How are Runaway Gap patterns interpreted by analysts and traders?

    Gaps appear in price charts whenever price movement occurs in between trading periods. This usually results from important ... Read Full Answer >>
  3. How do I build a profitable strategy when spotting a Shooting Star pattern?

    The shooting star pattern is interpreted by analysts as a severely bearish market reversal signal. A potentially very profitable ... Read Full Answer >>
  4. How are Stick Sandwich patterns interpreted by analysts and traders?

    Comprised of three candles, the stick sandwich candlestick pattern is so named because the middle candle is always the opposite ... Read Full Answer >>
  5. How do I build a profitable strategy when spotting a Runaway Gap pattern?

    While other types of gaps lend themselves quite easily to the creation of profitable trade strategies, the runaway gap requires ... Read Full Answer >>
  6. How are Shooting Star patterns interpret by analysts and traders?

    The shooting star candlestick formation is commonly interpreted by traders and market analysts as a bearish signal of market ... Read Full Answer >>
  7. Why do breakaway gaps happen on securities?

    In trading terms, a gap represents a very important pricing phenomenon. Gaps manifest themselves as empty spaces on bar or ... Read Full Answer >>
  8. Why is the Bullish Belt Hold useful for traders?

    The bullish belt hold, also known as the white opening shaven bottom, is a candlestick chart trading pattern that may be ... Read Full Answer >>
  9. Why is the Bullish abandoned baby pattern important for traders?

    In candlestick charting terminology, abandoned baby patterns are small doji candles that form at the top or bottom of a price ... Read Full Answer >>
  10. What are common trading strategies when identifying a Downside Tusuki Gap pattern?

    Tasuki gap patterns are three-day candlestick trend patterns. They are typically interpreted as a continuation formation ... Read Full Answer >>
  11. Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... Read Full Answer >>
  12. Do stop or limit orders protect you against gaps in a stock's price?

    Many individuals are hesitant to invest in the stock market because of the large gaps in prices talked about in the news. ... Read Full Answer >>

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