Gaps and How Markets Move In Contraction and Expansion

There are several ways to trade gaps but first, there should be a solid understanding of what Gaps are and how they show up. Markets aren’t that hard to read if we have some simple ways to see them that adhere to the principles of movement.

All markets move in contraction and expansion. A Gap is the sudden supply/demand imbalance that comes out of the contraction and shows up as the expansion. These expansions can even be used to measure how far the next expansion will go.

Start with a simple bar chart and erase everything else off the chart. Look and simply see the dense areas of contraction (Range). Then see the expansion (Gap), followed by another contraction.

Look for same-size contractions and expansion and you will start to see how organized price flow can be. It’s no different than swings in that minor contractions and expansions make up the major contractions and expansions.