3
Spot the bubbles and win
What topics are covered in this chapter?
In this chapter, we examine the different types of gap depending on their positions in the trend:
- exhaustion gap (island reversal)
- breakaway gap
- runaway gap
- common gap
What are the objectives?
The objectives of spotting a gap are:
- To determine if the old trend might be ending.
- To determine if a new trend might be beginning.
Introduction
Gaps at the bottom or top of charts are classical pattern formations that traders are always trying to spot. A gap is an empty space in the chart between the day’s low (or high) and the previous day’s high (or low). This gap signifies an overnight change when the local market is not trading. The following day, participants rush in to ...
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