As we already know the quotes represented by bar or candle charts provide a more detailed information than a continuous curve prices. A major advantage is the information given in relation to the position of the opening and closing rates of each session, and the scope checked in relation to previous days. Another great advantage is supplied to us by the analysis of the gaps formed in the bar charts. GAPS
represent discontinuities in the prices on charts, constituting blanks, ie prices at which level there was no transactions. This discontinuity in prices is caused by the fact that the expectations of either supply or demand are equal. Suddenly, for certain reason, all investors realize that the particular asset price is too low or too high in relation to its real value. It follows that no transaction is made until the price has fallen or risen to more accurate values.
There are different ways to define GAPS
, each giving rise to a different type of gap. Also the gaps have different names and meanings, depending on the location where they occur during the price movements. Usually they are divided into two types: