List of Financial Market Terms

A gap is a break between prices on a chart during stock trading that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between, or simply stated an area on the chart where there is no trading happening. Gaps can be created by regular buying or selling pressure, earnings announcements, after hours momentum, or any type of news release. 

A bearish gap, also known as a downside gap, occurs when selling pressure results in a price gap to the downside. It can be seen in multiple trading systems, such as a day trading system, stock trading system, options trading system, or futures trading system.

Gaps tend to act as magnets, pulling the stock price into the gap and often times resulting in a gap fill.  There's no true determined percentage of gap fills, but experience tells us that gaps fill approximately 75% of the time.  Intraday gaps fill closer to 85% of the time in our guesstimation.

Here is an example of a Bearish Gap (white oval) in GOOG.  A Bullish Gap can also be see on this chart, and is highlighted using the green oval tool.

bearish gap example in stock trading

Related terms: Bullish Gap, Gap Fill, Breakaway Gap, Runaway Gap, Exhaustion Gap

See also: Dead Cat Bounce, Stock Momentum

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