Ever think about why some equities start considerably higher or lower than where they closed the previous trading day? Is it possible to profit from these abrupt price increases? Yes, these price differences are to your advantage. Using the gap up and gap down strategy is crucial! This tactic is straightforward but effective. It assists you in taking full advantage of the price differentials that occur when the stock market opens. The significance of gaps in the stock market cannot be overstated. They are able to display trade possibilities and short-term momentum. To make trading decisions on a daily basis, you need to be able to predict gaps up and down. To ease your trading journey we are going to tell you about the best strategy to identify the gap up and gap down stocks. So let’s begin our article;
Strategy to identify gap up and gap down stocks
Before delving into the strategy to identify the gap up and gap down stocks, let’s discuss their respective definitions;
What is gap up in stock market
When a stock or index opens higher than it closed the previous trading session, this is known as a “gap up.” The price chart shows a clear difference between the opening price of the current day and the closing price of the previous day as a result of this upward movement.Positive mood in the market is typically indicated by gaps. This upward trend may be caused by a number of things,
It includes;
- Good news
- Robust earnings results
- Additional positive developments pertaining to the business or the Indian stock market overall.
What is gap down in stock market
When a stock or index opens less than it closed at the previous trading session, this is known as a “gap down.” A gap appears in the price chart as a result of this downward trend. This suggests a sharp decline in price from the closing level of the prior day to the beginning level of the current day. A gap down can be caused by several factors.
It includes:
- bad news Unsatisfactory corporate earnings reports.
- Tensions in politics.
- Events in geopolitics.
- Additional unfavorable elements affecting the market or particular firm equities.
Types of gaps in stock market
There are the following types of gaps in stock market;
Common Gaps: Usually unremarkable, these happen at random within a trading range. They frequently fill up rapidly and don’t show a big shift in the trend.
Breakaway gaps: These mark the beginning of a new trend or a breakout from the prior range and appear at the conclusion of a price pattern, such as a consolidation, triangle, or channel. They are not likely to be filled very soon and are typically accompanied by high volume.
Runaway Gaps: They show a great momentum and continuance of the current trend and occur in its direction. They are also known as measurement gaps. They frequently appear in the middle of a price movement.
FAQs
What is gap up meaning in the stock market?
Ans. Opening of the market at a higher price than the previous session is called gap up in stock market.
How to find gap up and gap down stocks in NSE?
Ans. Here are the following ways to find out the gap up and gap down stocks;
- Analyze the candle of the nse for the first 15 minutes after the market opening.
- If the candle seems bullish, it is gap up, if the candle seems bearish it is gap down.
How to predict gap up and gap down
Ans. It is hard to predict gap up and gap down stocks in the stock market. However, your stock brokerage predicts the gap up or gap down before the opening of the share market.
