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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What are the main differences between Exhaustion Gaps and Breakaway Gaps?

    Read about the primary differences between two types of price chart gaps – breakaway and exhaustion – and how traders react ... Read Answer >>
  2. How are Runaway Gap patterns interpreted by analysts and traders?

    Find out what runaway gaps mean in a price chart and how traders and technical analysts interpret them differently than other ... Read Answer >>
  3. How do I implement a forex strategy when spotting a Runaway Gap Pattern?

    Read about some strategies to consider after spotting a runaway gap pattern in the forex market, including how to distinguish ... Read Answer >>
  4. How are Exhaustion Gap patterns interpreted by analysts and traders?

    Learn how to spot and interpret exhaustion gap patterns like traders and analysts do, and see why these patterns are considered ... Read Answer >>
  5. How do I build a trading strategy after spotting a breakaway gap pattern?

    Capitalize on the irrational exuberance investors create, forming a breakaway gap. Learn the best strategy for trading a ... Read Answer >>
  6. How do I build a profitable strategy when spotting a Runaway Gap pattern?

    Understand the basics of the runaway gap and how to utilize this pattern to establish profitable trade strategies, including ... Read Answer >>
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