Hey traders,

In this article, we will discuss a very common pattern that is called gap.

In technical analysis , the gap is the difference between the closing price of the previous candlestick and the opening price of the next candlestick .

📈Gap up represents a situation when the price bounces up sharply at the moment of a transition from one candlestick to another. The price gap that appears between them is called gap up.

📉Gap down represents a situation when the price drops sharply at the moment of a transition from one candlestick to another, the price gap between the closing price of the previous candle and the opening price of the next candle is called a gap down.

From my experience, I realized that with a high probability the gap tends to be filled. For that reason, once you see a gap, consider trading opportunities around that.

Depending on the market conditions where the gap appears, there are several types of a gap to know:

1️⃣Common gap appears in a weak, calm market. When the trading volumes are low and the market participants are waiting for some trigger, or the asset reached a fair value price.

2️⃣Breakaway gap appears in a situation when the price suddenly breaks a structure (support or resistance) in a form of a gap.
Such a gap usually confirms a structure breakout.

3️⃣Runaway gap usually appears when the market is growing or falling sharply. It signifies the dominance of buyers/sellers and highly probable continuation. Usually, such gaps are not filled.

4️⃣Exhaustion gap is, in contrast, appears around major key levels and signifies a highly probable reversal. The exhaustion gap is usually confirmed by a consequent strong opposite movement that fills the gap.

Learn to recognize gaps on a chart and learn to interpret them. It will increase the accuracy of your technical analysis .

❤️If you have any questions, please, ask me in the comment section.
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