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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
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Eric Thies
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.