Gaps
In the context of trading, a gap is the difference between prices on a chart. The term typically refers to situations when there is a sharp movement in price with no trading occurring in-between. Gaps can occur on any financial market and are especially common in cryptocurrencies as they tend to be highly volatile and frequently experience dramatic movements.
There are several types of gaps that traders should be aware of, including common gaps, breakaway gaps, runaway or measuring gaps, exhaustion gaps, island reversals and windows (also known as open air). Common gaps tend to occur after large news events or announcements while breakaway/runaway/measuring gaps happen during strong trends with increased buying or selling pressure. Exhaustion and island reversals indicate potential trend reversals while windows appear when opening prices fail to match closing prices from the previous day – generally because of weekend or holiday trading hiatus periods.
Understanding how different types of gaps work can help traders anticipate future price movements and adjust their strategies accordingly. In particular, examining gap patterns can give valuable insights into overall market sentiment since they often signify major shifts in underlying fundamentals such as supply & demand imbalances or changes in investor appetite for risk taking behavior. However it’s important to note that not all gapping activity has significant implications so it’s always wise to combine technical analysis with fundamental research before making any decisions about trades involving cryptocurrency assets.
