Price Gap

A price gap, either to the upside or the downside, occurs when the opening price of the new trading sessions is severely above the closing price of the previous sessions. On the chart, a gap is visible which will be closed by price action eventually. A price gap is usually the result of an unexpected fundamental development during low trading volume or when markets are closed.

A price gap can either be closed quickly which will mark a reversal or price action will accelerate further to the upside/downside in which case the trend will extend and the gap will be closed at some point in the future. The circumstances of the price gap as well as other aspects of technical analysis will indicate what should be expected next.

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