What are the most common gaps in technical analysis skills and how can you address them?

While understanding the most common gaps such as open, breakaway, runaway and exhaustion is important, addressing them to make sense of building a trading plan is the hardest skill. I have found that a breakaway gap is best used when identifying the start of a new Elliott wave cycle. This gap typically starts the new trend we are about to see, breaking out of a previous price zone. Not only does this make for identifying it, but can open the idea to building a trading plan from this initial impulse. If the gap fills, or retraces quickly in the event of whipsaw, it would invalidate the start of Elliott and therefore invalidate the plan for expecting price action to continue moving forward as we would expect from a break away.

Gap is created as a result of displacement of price from a supposedly open price of a candle to another open price of the same candle. It could be a common gap, runaway gap, breakaway gap or exhaustion gap. They are all different and have different approach. As you can not expect a runaway gap to be filled in a short term duration. meaning banking on such idea can lead to heavy drawdown.

Gaps represent pockets of untapped liquidity in the market, which can serve as potential support or resistance zones that may be filled at a later time. One of my preferred strategies involving gaps is to position a buy-stop order just above a downward gap and a sell-stop order just below an upward gap. The rationale behind this approach is that if the gap is eventually filled and the price continues to move in the opposite direction of the initial gap (which was either an opening gap or a breakaway gap that has transitioned into an exhaustion gap), there's a higher likelihood that the market momentum will persist in opposition to the original gap direction.

1. Opening Gap: Early trading gaps often get filled and are relevant for day trading. 2. Pattern Gap: Forms in low-volume markets, usually filled. Signals future volatility. 3. Breakaway Gap: Marks the start of a significant price move, accompanied by high volume. 4. Runaway Gap: Occurs mid-move during a trend. signaling its continuation. 5. Exhaustion Gap: Signifies the end of a price trend, leads to a sharp reversal, and is quickly filled. Gaps provide insights but aren't foolproof. Please incorporate gap analysis into a comprehensive trading strategy.

Don’t use technical analysis in the first place because it’s garbage. Every Tom, Richard and Joe has written a book about technical analysis. It’s pure garbage.

Technical Analysis is not just studying graph patterns over period of time. One has to analyze - reasons for movement on that day - short term / long term impact of the event that helped movement in charts - map news /events / performance / few other etc with chart patterns. Keen calculative, observation and comprehension skills add to technical analysis.

Hi Thanks for giving Opportunity First All Technical Analysis person Not is Give Same View for In Technical Chart If View of the Technical Chart Gap Is Not Theoretically is showing future Movement,But they give Break Out or Break Support. As per Technical Analysis We always look or follow the Mountain pattern and We Need to look both side Up and Down Thanks Please give your report for My view

Using “gaps” to describe “gaps” in the first sentence seems futile. Let’s simplify: 1). Trends are the starting point 2). After trends are established, it’s NOT the price that matters so much as the VOLUME (think of VOLUME as “votes” for a certain price and/or trend)! Said differently, big price changes on small volume matters LESS than those same price changes on above average volume. 3). All trends are based on certain underlying beliefs, which are in turn based on separate variables, which are each based on historical facts + assumptions about the future…#AlwaysRoom4Error 3).

There are also partial and full gaps. Partial gapping occurs when the opening price is higher or lower than the previous day’s close but within the previous day’s price range. Full gapping occurs when the open is outside of the previous day’s range. Many traders also play the gaps. When a trader says a gap has been filled, this means that the price has moved back to the original pre-gap level. These fills occur because of irrational exuberance, or because when a price moves up or down in a gap, it doesn’t leave behind any support or resistance or because exhaustion gaps are typically the most likely to be filled as they signal the end of a price trend. Fading occurs when gaps are filled within the same trading day on which they happen.

In the event of a runaway gap, we can find that this move comes typically right at the 50% point of the larger trend. Again like the break away gap, other factors should be considered and in this case, high volume will be what enables price action to continue in the larger trend with out retracing to fill the gap. I have used this gap as a zone extended out into the future when price has inevitably retraced back into the future in a corrective wave.

There is NWOG known as new week open gap in the market that is found at the beginning of the week in the market. The analysis of gap should be more profitable if transposed to a lower time frame and see the if the gap is on an area of value. If Yes, it is better to align with the orderflow of the market to come back into the range of gap created before market will create buy or sell runs. An example of such gap happened this week on AUDCHF on M30 timeframe. There are different ways to trade different gap depending on the market condition.

While I don't use an exhaustion gap as much as the other gaps with my analysis, I have used the most common opening gap to set daily bias. The basics of finding the bias for the day is to notice if a large gap occurs at open, to simply track price action within the first 15min to an hour at open. If the gap fills, we continue in that direction. If the gap fails to fill we stay in the direction of the gap. Today was an example, SPY gaps down and within 45 minutes the gap was filled and we continued to push higher until end of day. This is more of a scalp strategy, but could also be used as mentioned before to understand the daily bias if looking to enter to a long term trade, or what may be more beneficial to you as the trader.

Gap trading is a reliable entry system for multiple asset classes and timeframes. As with any other entry criteria however, it is not a stand-alone money making system. For a successful gap trading strategy, one must make sure to realize what the orderflow is doing and if there is a trend, to only consider gaps in the direction of the trend (in this way you will think of a gap always forming "at a discount" in relation to both its fair value and projected future price (true trends tends to continue). A volume study can also be combined with gap trading as gaps formed by huge buyer activity during a strong trend up are more valuable than gaps formed by low volume moves.

To trade market with gap is two things, either to trade the fill of the gap itself or wait for the fill of the gap and decide a clear bias in the market. As fair valuation is concerned, after gap been filled, Market makers will move the market in their intended direction. A gap trader can use that fill to confirm his bias in order to ride with the MMs. For example, price had a bullish rally to fill a gap and close above it, and creating bullish reversal candles on the gap, making it a support level (area of value) whereby the market start a new impulsive buy from there.

The most effective approach to trading gaps involves waiting for confirmation before entering. My confirmation method entails waiting for a level to break and then retest in a short time frame. Catching the trade when the 9EMA aligns with the trade direction is a positive indicator to enter. This strategy offers a favorable risk-to-reward ratio, with the stop loss set at the level that broke and the target being the next gap level.

One of the ways to trade market with "gap fill" is to leverage Call Spread or Put Spread after setting your Target Price (i.e. spot price where the gap is filled) and Initial Price (i.e. where you believe there's a momentum to fill the gap at either breaking current resistance or support level). Using Options Call/Put Spread allow you to define the risk-reward ratio clearly, and is powerful when used properly.

Simplest way to tackle this is to start investing in share markets. Start with little, so that if there are even losses, it wouldn’t hurt that much. Learn from what went wrong and keep that in mind while investing for the 2nd time. Bookish knowledge looks cool but earning profit or loss in real life is what will assist in improving one’s technical analysis skills.

Trading gaps in the market indeed needs a quality education. Without learning from the different occurrences of gap, it may be difficult for a new gap trader to take advantage of such market opportunity. For example, taking a "gap and go" type for a "gap and fill" type. That is a bad way to lose chunk of money in the market.

Analyzing the historical gaps in an asset's performance can provide insights into future expectations and facilitate a thorough evaluation. For instance, examining the historical data of the VIX reveals that 100% of daily gaps have been filled and subsequently reversed. This information alone can present potential trading opportunities centered around daily gap patterns on the chart. Evaluating these gaps also involves comprehending the underlying reasons for the gap, whether it's driven by earnings, fundamental shifts, or news-related events.

Gap trading skill can be developed by practising and backtesting on charts and see how it has happened, played out in the time past, this accumulation of data will boost your confidence and morale even with right skillset to trade gaps.

The size of a gap matters in terms of how quickly it fills. Smaller gaps tend to fill faster and offer more favorable trading opportunities. My gap trading approach involves setting alerts on the chart slightly before gap entries and fill levels. When these alerts trigger, I wait for confirmation before entering the trade. With practice and adherence to your own rules, you can develop a robust trading system to follow and trust for consistent trading.

Combining skills can be highly effective in trading. Gap trading is among the most successful trading strategies. When you merge this skill with vertical debit spread trading, you can efficiently trade gaps with reduced risk. It's akin to fishing with bait, where you drop your line, wait patiently, and seldom lose. The key is timing for reaping your rewards.

Technical Analysis in some cases can just be a self fulfilling prophecy. It would be dangerous to rely solely on this and I recommend backtesting any beliefs you might have before implementing a trading strategy on TA methods

Gaps in this knowledge space need not be about only gap trading. Gap trading is just a subset of whole array of topics that constitute technical analysis. If we enquire what is the gap in knowledge space of whole domain then much less covered, time cycles and related patterns call for a discussion. This is a topic that only very few really understand and then there are even fewer who can teach and write and talk from position of authority. It would be worthwhile to give attention to this very vital space in realm of technical space. These cycles are important to have an wholesome perspective.

Gap ups must be supported by valid reason...counter volume has to be very high compared to previous volume in the same time frame... strict stop loss has to be maintained irrespective of all other criteria are met