Price Gap
Price gap is a term used to describe the difference between the current market price of a security and its previous closing price. It is also known as the price difference or the gap. Price gaps can occur in any type of security, including stocks, bonds, commodities, and currencies. Price gaps can be caused by a variety of factors, including news events, economic data releases, and changes in market sentiment.
History of Price Gap
The concept of price gap has been around since the early days of stock trading. In the early days of stock trading, traders would often observe gaps in the price of a security when the market opened. These gaps were caused by news events or changes in market sentiment that occurred overnight. Over time, traders began to recognize that these gaps could be used to identify potential trading opportunities.
Today, price gaps are still used by traders to identify potential trading opportunities. Price gaps can be used to identify potential breakouts or reversals in the price of a security. Traders can also use price gaps to identify potential support and resistance levels. By studying the price action of a security, traders can identify potential price gaps and use them to their advantage.
Table of Comparisons
| Type of Gap | Description |
|---|---|
| Common Gap | A common gap occurs when the price of a security moves sharply higher or lower without any trading occurring in between. |
| Breakaway Gap | A breakaway gap occurs when the price of a security moves sharply higher or lower after a period of consolidation. |
| Exhaustion Gap | An exhaustion gap occurs when the price of a security moves sharply higher or lower after a prolonged trend. |
Summary
Price gap is a term used to describe the difference between the current market price of a security and its previous closing price. Price gaps can be caused by a variety of factors, including news events, economic data releases, and changes in market sentiment. Price gaps can be used to identify potential trading opportunities, such as breakouts or reversals in the price of a security. For more information about price gaps, traders can visit websites such as Investopedia, The Balance, and Investing.com.
See Also
- Support and Resistance
- Breakout
- Reversal
- Trend
- Consolidation
- Volatility
- Price Action
- Technical Analysis
- Chart Patterns
- Market Sentiment
