Gapping

AAA

DEFINITION of 'Gapping'

In general, a trading strategy in which the participant borrows short and lends long. This strategy gives the lender an overall better interest rate as short rates are generally lower than long rates. Also in technical analysis, gapping can refer to the use of a gap strategy which looks at stocks that display price gaps from previous closes.

INVESTOPEDIA EXPLAINS 'Gapping'

To employ a gap strategy an investor can scan the morning prices for a gap and watch to see what the stock does in the first couple hours of the trading day. In general, if the price goes up, it signals a buy, and if it goes down, a short. There are several variations of the gap strategy.

RELATED TERMS
  1. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  2. Stock

    A type of security that signifies ownership in a corporation ...
  3. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  4. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  5. New York Stock Exchange - NYSE

    A stock exchange based in New York City, which is considered ...
  6. Wall Street

    1. A street in lower Manhattan that is the original home of the ...
RELATED FAQS
  1. How can the exponential moving average be used in swing trading?

    The exponential moving average (EMA) is a variation of the simple moving average that places more emphasis on the latest ... Read Full Answer >>
  2. What does a Bullish Homing Pigeon pattern tells a trader?

    A bullish homing pigeon is a double candlestick pattern that can appear in Japanese candlestick charts. Candlestick charting ... Read Full Answer >>
  3. What Book Value Of Equity Per Share (BVPS) ratio indicates a buy signal?

    Book value of equity per share (BVPS) is a ratio used in fundamental analysis to compare the amount of a company's shareholders' ... Read Full Answer >>
  4. Does stockholders equity accurately reflect a company's worth?

    Stockholders' equity is one method to evaluate a company's worth. It tends to work better for companies in established industries ... Read Full Answer >>
  5. How can I spot trading opportunities looking at year-to-date (YTD) performance?

    Trading opportunities on the long side can be spotted by looking at stocks with the worst year-to-date (YTD) performance, ... Read Full Answer >>
  6. What are common growth rates that should be analyzed when considering the future ...

    Some of the most common growth rate metrics that investors and analysts consider in evaluating a company's future prospects ... Read Full Answer >>
Related Articles
  1. Active Trading

    The Elder-Ray Indicator: Seeing Into The Market

    Elder-ray helps determine the strength of competing groups of bulls and bears so you know when to buy and when to short.
  2. Active Trading Fundamentals

    When To Short A Stock

    Learn how to make money off failing shares.
  3. Investing Basics

    Do Your Investments Have Short-Term Health?

    If a company is strong enough to survive tough times, it is more likely to provide long-term value.
  4. Active Trading Fundamentals

    Short Interest: What It Tells Us

    This figure can be a real eye-opener about the market sentiment surrounding a given stock.
  5. Options & Futures

    Out-Of-The-Money Put Time Spreads

    Learn about this low-risk, bearish options strategy used to speculate on major market declines.
  6. Trading Strategies

    Find Turning Points With Single-Day Patterns

    On their own, single-day patterns can be unreliable, but that doesn't mean they can't be used effectively.
  7. Active Trading Fundamentals

    The Short And Distort: Stock Manipulation In A Bear Market

    High-quality stock reports needn't be confused with stock manipulators' dramatic claims.
  8. Active Trading Fundamentals

    Short Selling Tutorial

    Want to profit on declining stocks? This trading strategy does just that.
  9. Chart Advisor

    Stocks Breaking to Downside - Time to Sell?

    These stocks have broken patterns or trendlines to downside, indicating more selling could be coming.
  10. Chart Advisor

    3 Ways To Trade The Bounce In Coal

    News from the Supreme Court has caused active traders to turn their attention to the coal markets. We'll take a look at how to trade the bounce.

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!