All language subtitles for 3. How To Spot A Gap Gaps Explained In Detail

Now, gaps are actually rare things, that's why they make a great trading opportunity because, you

know, something unusual has happened.

There's been some significant event or significant news that's caused a gap in the prices.

And we go to identify it as first understand what it typically there is.

And that is there's no gaps.

When you look at, let's say, this chart like this, you'll see our options and our highs and all that.

But really, we're looking at the trading range of the highs and the lows.

And you can see from the trading ranges, whether it's an update or a down day, there's always an overlap

from the day before, even where we have that big spike on the right hand side, you know, it open

much higher.

There's actually a gap at the opening where that left tick mark is on that that really spiky red bar.

But then the prices came down to kind of overlap again from the previous day.

And then it goes on and so on, so on from there.

So there is some type of overlap when there's no gaps.

And that's actually very common.

What we're looking for, a situation where those arranger's don't overlap at all.

That would be a gap situation.

So if we look at this example here, you can see like days one, two, three and four, and this can

be whatever time period to one, if you're trading on minutes or hours or however your trading time

frame is, we'll just use days here to keep it simple.

But in particular, you're really looking at those closing open and closed prices.

That's really more of the classic formation of a gap is looking at an overall day's trading range.

And so days one, two, three and four, you can see there's overlap between each of the ranges of bars.

I don't have the opening closing here because that's not important.

When you're looking at a gap, you're looking at the range from the high to the low and there's overlap

from days one through four.

But then day through on day five, there is a gap.

You can see that there's a space in between the the highest high of the range from day four does not

even there's a gap between the lowest low on day five.

So there's no overlap between them.

And that would be a gap situation.

Now, you can identify a gap at the start of a day because by nature, for a gap to occur, the opening

is going to have to occur somewhere in a void, somewhere above the trading range of the day before.

So you can say, oh, this is something's going on here by the opening.

You know, you need a gap at the opening for sure.

But you can't you can't measure our gap until the day is over because it could open as a gap.

But then let's say in this example here, the prices actually fell and that bar got longer on day five,

going downward where there was overlap.

If there's any overlap at all, there is no gap.

There has to be a gap in terms of no overlap.

That's the key thing to take away.

So that's why you can't tell until the end of the day whether there's a gap situation that occurs.

And then we're going to need to wait a little bit longer, as you'll see coming up to confirm that gap

and then is a trading opportunity.

But for now, no overlap can open, can open in a gap situation has to close in a gap situation.

And we're really looking at the highs, the lows.

And so you're measuring from yesterday's high to today's low would be an example of an upside gap.

There's a space between yesterday's high and today's low or from yesterday's low to today's high, where

there would be a downside gap so gaps can be either upward or going down or and the differences between,

again, the bar's highs and lows, not the opens and closes.

So just really, when you're looking at the gaps, you're really looking at that trading range of highs

and lows.

So if you were to look at this example here in the right, you know, what would you think that is?

Is that an upside gap or would that be a downside gap?

And looks at like you're going upward.

So you guess that you're right.

But, yeah, yesterday's high does not match up to or does not overlap today's low.

So there's a gap in between the two.

By the same token, if we looked at this image, you'd see a downside gap where, you know, yesterday's

low does not overlap today's high.

There is a space in between them.

And so there's the other downside gap or an upside gap.

Gaps can be either way, either up or down.

And what do you have going on here?

You have a void.

You have the space.

And what's going on is there's no match of buyers and sellers.

There's no one.

There's no match.

And if somebody's looking to sell or buy at a certain price range within that gap area, there's a gap

between the two price ranges between the two days.

In this example here, prices had to go upward to form a match.

So there may have been people trying to sell just a little bit above, you know, the day before or

maybe below or somewhere within the range of the day before.

But something happened to there's some good news or something that triggered where everybody's saying,

no, I'm not going to I'm not going to sell that low.

I'm going to have to you're going to pay more for me to sell.

And so the prices rise and you can see a gap there between the two days.

So there might have been some really good news overnight that had caused the price to jump up and create

the gap.

That's what's happening.

Like in this example could be the opposite in a down gap, downside gap and this upward gap.

You can see there's some news overnight.

Prices jump right up right before the opening and the first opening bid, so to speak, or trade is

is well above the the overlap range.

There's a gap in between.

So that's how you can understand gaps.

And what you're looking for is you're basically looking for the space in this void between two trading

periods or, you know, between the two days.