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Exhaustion Gap

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Exhaustion Gap

An exhaustion gap is a type of gap in the price of a security that occurs when the price of the security has been trending in one direction for a long period of time and then suddenly reverses direction. This type of gap is usually seen at the end of a trend, and it is often seen as a sign that the trend is coming to an end. The exhaustion gap is also known as a runaway gap or a breakaway gap.

History of Exhaustion Gap

The concept of an exhaustion gap was first introduced by Charles Dow, the founder of Dow Theory. Dow Theory is a set of principles that are used to analyze the stock market and identify trends. According to Dow Theory, an exhaustion gap occurs when the price of a security has been trending in one direction for a long period of time and then suddenly reverses direction. This type of gap is seen as a sign that the trend is coming to an end.

The concept of an exhaustion gap has been used by traders and investors for many years. It is seen as a reliable indicator of a trend reversal and is often used to identify potential buying and selling opportunities. Traders and investors often use exhaustion gaps to identify potential entry and exit points in the market.

Comparison Table

Type of Gap Description
Exhaustion Gap A gap in the price of a security that occurs when the price of the security has been trending in one direction for a long period of time and then suddenly reverses direction.
Runaway Gap A gap in the price of a security that occurs when the price of the security has been trending in one direction for a long period of time and then suddenly reverses direction.
Breakaway Gap A gap in the price of a security that occurs when the price of the security has been trending in one direction for a long period of time and then suddenly reverses direction.

Summary

An exhaustion gap is a type of gap in the price of a security that occurs when the price of the security has been trending in one direction for a long period of time and then suddenly reverses direction. This type of gap is usually seen at the end of a trend, and it is often seen as a sign that the trend is coming to an end. For more information about exhaustion gaps, traders and investors can visit websites such as Investopedia, The Balance, and Investing.com.

See Also

  • Gap Trading
  • Breakout Gap
  • Common Gap
  • Continuation Gap
  • Island Reversal
  • Price Action
  • Support and Resistance
  • Trend Line
  • Volume
  • Volume Spike

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