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Price Gap Examples - Bitcoin Futures
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█ Three Types of Gaps
There are three general types of gaps:
█ 1 — The Breakaway Gap
The breakaway gap usually occurs:
Examples:
Key Characteristics:
█ 2 — The Runaway or Measuring Gap
The runaway gap forms:
Key Characteristics:
Why "Measuring" Gap?
█ 3 — The Exhaustion Gap
The exhaustion gap appears:
Key Characteristics:
█ Conclusion
█ Source:
Murphy, John J. Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications. New York Institute of Finance, 1999. Chapter 4, "Price Gaps," pp. 94-98.
█ Three Types of Gaps
There are three general types of gaps:
- Breakaway Gap
- Runaway (or Measuring) Gap
- Exhaustion Gap
█ 1 — The Breakaway Gap
The breakaway gap usually occurs:
- At the completion of an important price pattern.
- At the beginning of a significant market move
Examples:
- After a market completes a major basing pattern, the breaking of resistance often involves a breakaway gap.
- Breaking major trendlines signaling a reversal of trend may also involve this type of gap
Key Characteristics:
- Heavy volume often accompanies breakaway gaps.
- They are typically not filled (or only partially filled).
- In an uptrend, upside gaps act as support areas on subsequent corrections.
- A close below the gap is a sign of weakness.
█ 2 — The Runaway or Measuring Gap
The runaway gap forms:
- Midway through a trend (uptrend or downtrend).
- Indicates the market is moving effortlessly, usually on moderate volume.
Key Characteristics:
- In an uptrend, it signals strength.
- In a downtrend, it signals weakness.
- Acts as support or resistance during subsequent corrections.
Why "Measuring" Gap?
- It often occurs at the halfway point of a trend.
- By measuring the distance the trend has already traveled, the probable extent of the remaining move can be estimated by doubling the amount already achieved.
█ 3 — The Exhaustion Gap
The exhaustion gap appears:
- Near the end of a market move.
Key Characteristics:
- Occurs after objectives have been achieved and other gap types (breakaway and runaway) have been identified.
- In an uptrend, prices leap forward in a final push but quickly fade.
- Within a couple of days or a week, prices turn lower.
█ Conclusion
- By understanding the types of gaps and their characteristics, traders can better interpret market signals and anticipate potential trends or reversals.
█ Source:
Murphy, John J. Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications. New York Institute of Finance, 1999. Chapter 4, "Price Gaps," pp. 94-98.
Eric Thies
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