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Many textbooks describe an opening gap as being a bullish sign that the buyers are out in force. This only works if you know where you are in the price trend, and as no one knows what the future holds in price movement, then we can never know where we are in the trend. This is an observation lost on traders who insist on holding a losing position and believing it will return to profit. The flaw with this type of trading is if a position does return to profit, the trader has now been rewarded for bad behaviour and will continue to hold future losing positions expecting the same outcome. It’s not until one day the position loss becomes an account loss.
Gaps can be described as a bullish gap open, or a continuation gap and an exhaustion gap. By using chart analysis, these market events can be tested. Depending on your time frame as a trader, the results can be put to work to use as an entry tool to open a position and/or capture profits.
For the longer-term investor, the end of a trend is often the gap down on open in larger time charts, than just a daily view that most traders and investors use. These events often occur in a weekly chart time frame.