Traders can take advantage of the jumps and chatter in the price chart in digital currency markets with technical analysis and use them to their advantage.
Gaps are actually the areas on the price chart where the price of a stock rises or falls sharply when there is very little or no trading. Now, a smart trader can interpret these chats and use them to make more profit. In this article, we will fully describe the price chat in digital currency for you and help you to fully understand how and why chats occur and how you can use them to make profitable transactions.
What is a price chat?
As we said earlier, price gap types occur when the asset price moves up or down after the market closes. Price chatter occurs due to fundamental or technical factors. For example, if a company’s profit is much higher than expected at a certain point in time, the company’s stock may face a gap the next day. the door Forex marketThis is not at all unusual and may happen to all companies.
Novice traders are probably shocked the first time they experience price chat. Even the most seasoned traders back off when a cryptocurrency price chat occurs.
Usually, the price gap for common stocks rarely occurs, and mostly mutual funds, investment funds ETF and takes other digital and non-cash currencies. However, in these cases, chats are not very important.
How is a price gap created?
A price chat occurs when a stock closes, for example at 4:00 p.m. when the trading hours end, and then the price changes dramatically the next day. Now this price can be higher or lower than the previous day’s closing price. It is possible that something happened in the hours after the market closes or the transactions that take place before the market opens, that cause shopping frenzy Or Sales frenzy has been. In this case, a price chat will be created at 9 o’clock tomorrow, that is, right at the beginning of the working hours.
A buying or selling frenzy is said to be a situation where a media game, rumor and news causes buying or selling of a share. Now, the most common reasons that can cause a price gap in digital currency are buying shares and changing the ownership of shares or companies. The more and bigger the chat, the more important and influential the reasoning behind it. Because any important event that dramatically changes the stock value of the day will immediately affect the price of that stock when the market opens.
An example of a price chat
To better understand the concept of price gap in digital currency and other assets, we present an example for you. Consider the company Amazon. The company’s shares closed at $50 on January 29, 2009. After the market closed, it reported earnings that were much better than Wall Street analysts expected.
In after-hours trading, Amazon shares rose 14.7% the next morning and reached $36.57. In the image above, you can clearly see the price chat that occurred in the chart and also the increase in its trading volume.
Types of price chat in assets
In general, there are 4 types of price gap in financial markets, which we will describe below.
Common price chat
Common Gaps, sometimes called trade gap Or Regional gap is also known. These types of chats usually occur in turbulent cryptocurrency markets and are closed within days. They can occur when a stock is sold without taking into account the profits received from previous trades. to these stocks Ex-dividendthey say.
When a common chat occurs, it reinforces the lack of interest in buying the stock at that point in time. These chats are great to know and analyze, but they usually don’t create a specific trading opportunity.
Separator chat
Breakaway Gaps are gaps that are not usually filled. These chats occur when the stock price moves away from a support or resistance level in a candlestick chart. This chat reports a failure. This type of chat indicates a strong momentum and the price trend continues to decrease and increase after that. Additionally, the larger the gap, the stronger and larger the candle that follows will appear.
Continue chat or run away
This price gap in digital currency is also called measurement gap. Runaway Continuation Gaps, in an uptrend, indicate traders who did not enter at the beginning of the uptrend because they were waiting for its price to drop; But they came to the conclusion that this price reduction will not happen and then they started buying that currency or stocks.
This price chatter in the digital currency causes buying to unexpectedly increase and also indicates a fearful mood swing among traders. Volatile chats can also be caused by important news events that may cause traders to focus on a particular stock or currency. In a downtrend, these chats indicate a decline in the value of a stock by buyers standing on the sidelines and not buying.
Exhaustion chat
Exhaustion Gaps usually occur at important support and resistance levels and are also quickly filled and disappear.
Does price chatter in the market help trading?
While price chat itself is unpredictable; But it can be useful to predict the future stock price after a relative gap. The price increase or decrease can determine the stock trend line in the coming months. During a price chat, trading volume can be a good indicator for traders. A stock price gap in high trading volume means that buying that stock can push prices higher in the coming weeks and months.
As we mentioned before, the size of the gap is also very important. Smaller chats are less important and can actually happen on a daily basis for some stocks. While, chats are a big price to consider when trading. One of the events that you may encounter when facing a price chat is the filling of the chat, which we will discuss below.
Filling the price gap in the market
If the cryptocurrency price gap is a bullish gap, meaning that the price of the stock or currency has risen, a certain range remains on the chart between where the stock previously closed and where it is currently trading. In this case, the stock or currency price tends to return to the previous price, or so to speak, to fill the gap.
The same goes for drop chats. It should be noted that not all chats are filled; But in general, the tendency is for stocks to fill this gap.
Filling the price gap may occur for the following reasons:
a. Unreasonable price increase: The initial price increase is irrational and sudden, so it will disappear over time.
b. Resistance and support: When the price goes up or down sharply, it does not leave specific support and resistance levels.
J. Price patterns: These patterns, which include pivot points, can tell you whether a price gap is filling in the digital currency or not. Exhaustion Gaps are called those gaps that occur after a rapid price drop, they are usually filled faster. Because they indicate the end of a price trend. While continuation gaps and breakaway gaps are less likely to be filled, because they are a confirmation of the current trend of the chart.
Now, if a gap is filled on the same day as it appears, it is called the disappearance of the gap. In general, knowing about the types of technical analysis charts and fully understanding them will help you more to be present in the market.
Important points about price chat
Below are some points that you should pay attention to when facing a price negotiation in the market.
- When dealing with common chats, you should trade in the opposite direction; Because the market fills the gap after it happens.
- Continuous chats indicate a strong trend and traders can go with the flow and trade in that direction once it is established.
- Fatigue chat or exhaustion chat is a sign of trend reversal and traders should trade in the opposite trend after facing these chats.
With the help of these general rules, both traders who trade daily and traders who wait for a special opportunity can analyze the chats and trade accordingly.
In this article, we tried to investigate what price gap is and how the types of price gap are formed. If you still have questions about these chats and profiting from these opportunities in the market, share them with us and the contacts.
Writing price chat in digital currency; Familiarize yourself with the types of price chat for the first time on the Wallex blog. appeared.
