When a market gaps down, whats causes price to go up?

[SanMiguel]

When a market gaps down on the open the next day, why does price often immediately rise, fill the gap, and then sometimes fall again?

vice versa for gapping up

 

[tripleogstar]

gud question. I am not entirely sure to be honest, but I would think it is partly to do with pre market auctions.

 

[SanMiguel]

gud question. I am not entirely sure to be honest, but I would think it is partly to do with pre market auctions.

Does it almost always happen? If so, don't people take advantage of it with a quick trade.
Gap down, buy.
Gap up, sell.

 

[Shakone]

Not the only reason, but perhaps part of the reason: Suppose you were short at yesterdays close, you wake up and market gaps down. You've gained some money, and today's trading is uncertain so you might then take some profits which pushes price up.

People do try to take advantage of gaps, but they don't always fill the next day. THere are different types of gaps - exhaustion, breakaway etc.

 

[Aspire]

If the market opens way out of line from where it should be relative to other similar markets (i.e. someone put a big order at quite a high/low price in the opening auction) then it will naturally move back in line with the other markets through a combination of people taking advantage of the good price, people not wanting to get shafted at the bad price and spreaders and computers moving the price back in line.

Before trying to trade an opening gap make sure you know what the other markets have done and are on top of any fundamental news that might have come out.

 

[SanMiguel]

If the market opens way out of line from where it should be relative to other similar markets (i.e. someone put a big order at quite a high/low price in the opening auction) then it will naturally move back in line with the other markets through a combination of people taking advantage of the good price, people not wanting to get shafted at the bad price and spreaders and computers moving the price back in line.

Before trying to trade an opening gap make sure you know what the other markets have done and are on top of any fundamental news that might have come out.

Not massive gaps, I mean NASDAQ gapped down 30 points at open today and seems to this fairly regularly, then filled the gap, then moved down, and in the last few hours has moved above open again by a few points.

 

[intradaybill]

When a market gaps down on the open the next day, why does price often immediately rise, fill the gap, and then sometimes fall again?

vice versa for gapping up

Profit taking. Those that were lucky to be short cover positions. Money moves the world.

 

[N Rothschild]

its a self fulfilling prophecy that's all. market gaps need to be filled, there for people buy/sell in order to make money on the anticipation of the gap being filled, which in its self causes the gap to be filled. simples