Gap fills?

[drukes1234]

I don't trade much on popular technicals but sometimes I use gaps as targets but what I never understood is the theory that almost all gaps eventually get filled. Is there any sort of rationale that makes sense for this theory?

In my opinion, which is the same opinion I have in regards to most technicals that the majority of the public use is that it's a simplistic theory.


#1 it looks like a good target zone because it stands out in a big way on the chart.

#2 I wouldn't be surprised if most gaps eventually do fill but that is more likely because markets back and fill a lot more than people realize.

 

[BeingProfitable]

Quote from drukes1234:

I don't trade much on popular technicals but sometimes I use gaps as targets but what I never understood is the theory that almost all gaps eventually get filled. Is there any sort of rationale that makes sense for this theory?

In my opinion, which is the same opinion I have in regards to most technicals that the majority of the public use is that it's a simplistic theory.


#1 it looks like a good target zone because it stands out in a big way on the chart.

#2 I wouldn't be surprised if most gaps eventually do fill but that is more likely because markets back and fill a lot more than people realize.

I'm by no means a gap expert, but the research I have done related to gaps leads me to think that gaps are closed more likely because of 2 then 1. However I would not dismiss 1 completely, especially considering that once price starts to close the gap, there is less likely to be any strong S&R in the way to keep the gap from closing.

Maybe someone here that has done some extensive research around gaps is willing to post some data.

 

[drukes1234]

Ya I was suggesting that the reason people look at gaps as a target is because it's such an obvious target zone, I definitely wasn't suggesting that's WHY they fill.

 

[Bolimomo]

Quote from drukes1234:

I don't trade much on popular technicals but sometimes I use gaps as targets but what I never understood is the theory that almost all gaps eventually get filled. Is there any sort of rationale that makes sense for this theory?

Yeah. The key words are "almost" and "eventually".

Eventually - like day trading shorting a up-gap, you hold your short and ride the meteoric rise and wait for the fill a few years later.

 

[maninjapan]

I was looking for stats on gaps myself. The gap guy (website) seems to have a fair bit on it. Its a paid serviece but there seems to be a fair bit of free stuff there too. I found it relatively useful.