A gap up is when the low of a candle/bar is higher than the high of the previous candle/bar.Price gaps can be identified using candlestick or bar graphs.A price gap is an area on a chart where no trading activity has taken place (since its occurrence).Practise with £10,000 of virtual funds on IG’s trading simulator, or open a live account if you’re ready to trade gaps for real Understand the risks involved when trading, and make a trading plan.Study the information in this article, and take a look at IG’s trading strategy and planning section This assumes a higher probability to trading for a ‘gap fill’. An exhaustion gap suggests the directional move to be capitulating and possibly reversing course. Traders looking to trade a ‘gap fill’ might prefer to do so in the event of an exhaustion gap. Trading for a gap fill would therefore equate to trading against this momentum and trading against the newly formed trend. This is due to the assumption that the market event which caused this type of gap to occur carries a strong directional momentum. There is an assumption amongst some traders that gaps must be filled, meaning that the price is expected to return to the gap area at a future date.īreakaway and runaway gaps are believed to have a lower probability of being filled. In an uptrend an exhaustion gap would suggest the uptrend to be nearing an end and possibly reversing into a new downtrend.
The above chart shows an exhaustion gap late in a downtrend, which highlighted the end of the move lower and the start of a new uptrend.
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