A gap (Gap, English for "break") is a situation on a price chart where a noticeable interval with no trades forms between the close of one candle and the open of the next. In other words, the price "jumps over" a certain range, leaving no continuous line of quotes on the chart.
Gaps most often arise when the market was not trading for some time, and during that period significant news appeared or participant sentiment changed. On classic exchanges, gaps are typical between the evening close and the morning open. Cryptocurrency markets operate around the clock, so full-fledged gaps are rarer there, but they are possible during sharp surges in activity or on individual venues.
Types of gaps
- a gap up — the price opens above the previous close;
- a gap down — the price opens below the previous close.
Traders watch gaps closely, since the price often later tends to "close" the gap, returning to former levels. Analysis of such zones is used in technical analysis as one of the guidelines for making decisions, although it does not give a guaranteed result.
