What Is a Gap in Trading?
A gap occurs when the market opens above or below the previous candle’s closing price, leaving an empty space on the chart. Gaps usually form due to: News releases Earnings reports Weekend market closures Strong institutional buying or selling Gaps reveal market sentiment, imbalance between buyers and sellers, and potential continuation or reversal.
🔁 Reversal Gap Patterns
1️⃣ Reversal Bearish Gap
Price gaps up into a supply / resistance zone, but sellers quickly step in.
How to trade:
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Gap up → rejection → bearish candle
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Indicates trend exhaustion
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Look for short entries below the reversal candle
2️⃣ Reversal Bullish Gap
What it shows:
Price gaps down into a demand / support zone, but buyers absorb selling pressure.
How to trade:
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Gap down → strong bullish close.
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Signals potential trend reversal.
Look for long entries above the bullish candle.
3️⃣ Bearish Gap
What it shows:
Strong selling pressure with no interest from buyers.
How to trade:
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Indicates bearish momentum
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Best traded in a downtrend
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Avoid buying until the gap shows signs of filling.
4️⃣ Weekend Bearish Gap
What it shows:
Bad news or negative sentiment over the weekend.
How to trade:
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Monday opens lower
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Often continues downward early in the session
Wait for pullbacks before entering shorts.
5️⃣ Bullish Gap
What it shows:
Strong demand and aggressive buyers.
How to trade:
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Gap up + continuation = trend strength
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Use previous resistance as support
- Ideal for breakout traders.
6️⃣ Weekend Bullish Gap
What it shows:
Positive news or strong sentiment over the weekend.
How to trade:
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Monday opens higher.
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Often retraces slightly, then continues up.
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Buy on pullback to gap area.
7️⃣ Bullish Liquidity Run Gap
What it shows:
Smart money sweeps sell-side liquidity before pushing price higher.
How to trade:
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Fake downside move
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Strong bullish candle after liquidity grab
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Entry after confirmation
8️⃣ Bearish Liquidity Run Gap
What it shows:
Buy-side liquidity is taken before price drops.
How to trade:
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False breakout above highs
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Sharp bearish move follows
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Trade after rejection confirmation
9️⃣ Gap Filled
What it shows:
Price returns to fill the gap, showing market balance restored.
Key insight:
“Most gaps get filled — but not immediately.”
How to trade:
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If gap fills and holds → reversal possible
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If gap fills and breaks → continuation likely
