Technical Analysis of Gaps: Identifying Profitable Gaps for Trading

Chapter 2. Windows on Candlestick Charts

Now that we have covered the basics of what gaps are, let’s look at how gaps are viewed on Japanese candlestick charts. Japanese candlestick charts display the same information (open, high, low, and close) that bar charts display but in a more striking way visually. Also, special vocabulary often accompanies the candlestick charts. For example, in Japanese candlestick charts, a gap is referred to as a window.

The candlestick chart of Johnson & Johnson (JNJ) in Figure 2.1 shows gaps, or windows, at points A, B, and C. For a window to occur, there must not be any overlap between two adjacent candles. For a window to occur, space must exist between the shadows of adjacent candles; because of this space, windows ...