From time to time, there will be unusual cracks in the trading market. The opening price of the new time axis price is different from the closing price of the previous time axis, causing the K bar to form a discontinuous fault, which is commonly known as a gap/ crack . In the early days, this phenomenon was called short jump or long jump respectively according to the relative position of the opening price and the former closing price.
If the opening price of the new K bar is lower than the closing price of the former, it is called a gap ; if the opening price of the new K bar is higher than the closing price of the former, it is called a long jump . As shown below:
The time when gaps are most likely to occur in the foreign exchange market is on weekends , because the foreign exchange market is closed for two days on weekends, but various countries are still in operation, resulting in the suspension of foreign exchange data, but in fact the national data still fluctuates, opening on Monday When the latest data is updated on the quotation table, there may be a gap with the price at the close of last week.
Everyone has generally learned that the concept of a gap is: if a gap occurs, it must be filled . This concept is only partly correct, and I would like to take this opportunity to remind readers:
the gap will not be completely filled!
Gaps are not fully covered!
Gaps are not fully covered!
There are prerequisites for filling the gap, and the pattern signals generated according to the gap will also have different operation modes. Common gaps are divided into four types: ordinary, breakthrough, continuation, and exhaustion.
Next, I will describe one by one what kind of patterns are represented by the positions of the gaps, and how we should interpret these patterns.
Ordinary
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The gap position occurs in a fixed market, such as a consolidation zone, a triangle zone, or an equidistant channel. There is no new trend direction or a signal that can affect the original analysis logic for the market. To put it simply, the commodity trend will not belong to the ordinary gap because of the new analysis results generated by this gap.
The position of the ordinary gap is still in the same range, so the chance of covering is very high, but in operation, because the price is still maintained in the original fixed range, the short-term operational benefit ratio is quite low, unless it is based on Daily and weekly level operations, otherwise it basically doesn't make much sense.
breakthrough
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Usually, the market energy that forms a breakthrough gap will be greater than the normal market in the past, so as to show the pattern of breaking through the established market. As shown in the figure below, the original market was in a triangle convergence pattern, and the new K-bar jumped more gaps, and the opening and closing prices of this new K-bar remained outside the original range, which means that the next market will have A period of strong rise. (If the breakthrough direction is down, there will be a period of strong downtrend)
In this chart, the next K bar after jumping to create a gap showed a decline, and the closing price returned to the original triangle range. First enter the market manually, until the K-bar breaks through to the outside of the range and shows an upward trend, then you can enter the market again with multiple orders.
The chances of performing gap-covering for breakthrough gaps are not great in a short period of time, because there will be a period of unilateral market after the breakthrough. If you want to perform cover-up, you must wait for the heavy-volume market to be consumed before entering a callback or rebound There is an opportunity to fill in the gap.
The direction of the continuation
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gap is the same as the original trend direction , the bullish trend continues to jump long; the short trend continues to jump short. The gap marked in the figure below shows long jumps, and the direction of the entire trend is also long, indicating that the upward sentiment in the upward trend is strong, which will help the trend continue to extend.
The filling of the continuation gap will be determined according to the trading volume of the new K bar that created the gap at that time. Compared with the recent trading volume, the trading volume at that time is relatively large, and the chance of the phenomenon of covering will be reduced; if the trading volume does not increase significantly , indicating that investors have little confidence in this gap, thus reducing their willingness to enter the market, the price will easily enter a consolidation first, and the chances of successful cover will be greatly improved.
Exhausted type
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It has the same timing as the continuation gap , but the direction of the gap is opposite . There is a short jump in the long trend; there is a long jump in the short trend. In the figure below, the bottom of the original market is gradually rising, and at the same time, it has steadily broken through the previous high point, which is an obvious upward trend, until a gap with explosive trading volume appears at the mark.
It is not uncommon to see a gap in an upward trend, but it is dangerous when there is a gap with volume. The explosive trading volume means that many trading orders are executed before the current K-bar closes,
and usually the main force causing the explosive volume is large households or institutions , and they are used to operating a large amount of funds first to smash the market, causing the price to fluctuate up and down. Bo, sweep most of the retail investors out of the market, so as to make yourself have a better cost to make a layout. I believe everyone is used to this method.
Since the situation of trading is easy to appear, it is not difficult to cover the exhaustion gap, but the reverse market is easy to be manipulated by the big money. To survive here, you must master the art of stop loss.
The concept of "the gap must be filled" is no longer applicable to the current secondary market. Today's trading system is different from that of many years ago, and the overall market flexibility and structure are not imaginable back then. Many concepts have long been inapplicable. No matter how old you are this year, as long as you are still executing transactions, you cannot have fixed ideas, and you need to maintain your own flexibility at all times so that you will not be abandoned by the times.
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