How are common gaps formed and how are they important in technical analysis?

💥Common gaps are formed when there is a slight pause in trading activity or a trading range, and the price opens above or below the previous day's closing price without any significant news or events driving the market. These gaps are often seen as a natural part of market behavior, and they can be formed during regular trading hours or after-hours trading.

💥In technical analysis, common gaps are considered less significant than other types of gaps because they don't necessarily indicate a change in the trend or signal a new trading opportunity. However, they can still be important because they can provide clues about the overall market sentiment and help traders identify support and resistance levels.

💥For example, if a common gap forms during an uptrend, it may indicate that the market is taking a brief pause before continuing the upward trend. If the price remains above the gap, it can be seen as a support level for future price movements. Conversely, if a common gap forms during a downtrend, it may indicate a temporary pause in the downward trend. If the price remains below the gap, it can be seen as a resistance level for future price movements.

💥Overall, common gaps are an important aspect of technical analysis because they can provide context for understanding market behavior and help traders make informed decisions. However, it's important to use other technical indicators and analysis to confirm trading decisions and avoid false breakouts.



💥Some traders refer to it as the Trading Gap or Area Gap. The Common Gap is a normal and very common type of gap that is often closed soon after it is formed. It usually occurs during a trading range, indicating the lack of interest of most investors in that stock at that time.

💥Common gaps are considered less important in technical analysis and may not be reliable for forecasting because they usually occur during light trading periods. Buying or selling pressure that comes in has a chance to push the price up or down until the gap is filled. Alternatively, they often occur during trading sessions called sideways where technicians are usually not very interested in this type of gap.