Gap TheoryThe gap theory is short and simple. Not everything needs to be lengthy and laborious. "Everything should be simple as possible, but not any simpler"
Break-Away Gap
Once a new cycle has begun and you see a breakaway gap in the STARTING of a move, you get confirmation of this new cycle. HOLD.
Run-Away Gap
Once the trend is continuing for some time and then you see a second gap, this is a confirmation that you are somewhere in the MIDDLE of the move, so you know a further movement in price is expected. HOLD.
There is a possibility that you can get multiple runaway gaps.
Exhaustion Gap
After a move in price had already happened, a gap that signals the END of the move happens. If this is your 3rd gap on the, you should look very closely to distinguish if it is a runaway gap or exhaustion gap. SELL.
How do you tell the difference between the exhaustion gap and the runaway gap?
Easy, if after the gap happens the price shoot straight up without closing the gap in the next few days ---> runaway gap. HOLD.
if after the gap happens the price is closing the gap in the next few days ---> exhaustion gap. SELL.
If you like it, follow and like so it will be saved in your saved ideas for future reference.
