Understanding Runaway Gaps in Stock Trading

Learn what a runaway gap is and how it signals momentum in stock trading trends.

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A runaway gap refers to a pricing gap on a stock chart that occurs during a strong trend, often as the price moves in the direction of the trend. These gaps indicate a surge in interest and can often signal the mid-point of the trend. Investors see them as a sign of continuing momentum.

FAQs & Answers

  1. What does a runaway gap indicate in trading? A runaway gap indicates strong momentum in the direction of the trend and can be a signal for investors to consider continuing their positions.
  2. How can I identify a runaway gap on a stock chart? You can identify a runaway gap by looking for a pricing gap that occurs during a strong trend in the stock's price movement.
  3. What are other types of gaps in stock trading? Other types of gaps include breakaway gaps and exhaustion gaps, each indicating different market conditions and investor sentiments.