Article The Gap: Fade or Play

[T2W Bot]

One of the most regular and largely misunderstood phenomena of trading, particularly for newer traders, is the gap. What precisely is a gap? What causes one to happen? And most importantly, how should one trade a gap when it occurs?
In this article, I’ll answer these questions, and delve into identifying higher probability assessments for trading gaps.
First, a gap is the discrepancy between one day’s opening price and the prior day’s closing price. The chart below clearly illustrates a large gap in the E-mini Russell 2000 (TF) which occurred on Monday, March 23. Note that the Russell closed at 397.40 on Friday the 20th, and opened at a price of 410.20 the following Monday, forming a 12.80 point up gap.

By any standard, this would be considered a very large gap (more than 3%). So what could have caused price to open so much higher? In this case, it was positive overnight news, the unveiling and positive...

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[oildaytrader]

This is a forum thread for discussing the Knowledge Lab Article, "The Gap: Fade or Play".

Great article .Thanks

It seems like a good idea to wait for price to retrace back to the gap open , and wait for a reversal ,and after allowing sufficient time for price to stabilise .Once price has stabilised enter trade.

Ho do we identify the high probability gap entry?Do we look at indices or do we look for trend lines to start forming?

Gaps | How to Identify and Trade Gaps on a Chart