Reblog: What is Gap Trading?
When trading, one cannot overstate the importance of gaps.
Gaps refer to areas on a chart where the price of a currency or stock moves sharply up or down with little or no trading in between. As this area represents an abnormality in the normal price pattern of the stock / instrument, it gets referred to as a gap.
So of what use can a gap be to an investor? Because the tiny area represents a fluctuation in the pricing, a trader can potentially exploit the gap and make a profit.
Gaps occur as a result of underlying fundamental / technical factors that vary for each stock or instrument and require monitoring and knowledge by the investor.