Gap Down

What is the definition of Gap Down?

A Gap Down is when a stock opens at a lower level than the previous day's low. For example, if the previous day's high was 500, and the stock opened at 495, there would have been a 5 point gap down. This is considered a bearish signal.

This is also known as a Full Gap Down (as opposed to a Partial Gap Down which is when the stock just opens below the previous day's close).


Stockopedia explains Gap Down...

Gaps are areas on a share price chart where the price of a stock moves sharply up or down, with little or no trading in between. Opening gaps can be caused by news releases (for example, if a company's earnings are much higher than expected) or events that happen while the market is closed, or technical factors (e.g. traders placing their orders, before the market opens).

You can read more about Gap Trading Strategies here.



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