What types of gaps are there in the candle chart and what do they represent?

The gaps in the K-line chart reflect changes in market sentiment. Common types include ordinary, breakthrough, escape and exhaustion gaps, each with different meanings and applications, especially more frequently in the cryptocurrency market.

Apr 03, 2025 at 03:37 pm

The 'gap' in the K-line chart refers to the jump phenomenon of the price during continuous trading, that is, the blank area appearing on the price chart. The emergence of gaps usually reflects changes in market sentiment and the release of important information. The following are several common gap types in the K-line chart and their representative significance.

Ordinary notch

Common Gaps usually occur in markets with less price volatility. This gap is often meaningless and is usually filled in a short period of time. The emergence of ordinary gaps may be due to random market fluctuations or short-term trading sentiment changes.

The characteristics of ordinary gaps are:

• Appears in a range with less price fluctuations

• Usually filled within a few days

• No obvious changes in market sentiment

Breakthrough the gap

Breakaway Gap occurs when prices break through important resistance or support levels. This gap usually marks the beginning of a new trend, accompanied by larger trading volumes. The emergence of a breakout gap indicates a significant change in market sentiment and a shift in investors' expectations for the future.

The characteristics of breaking through the gap are:

• Appears when prices break through important technical positions

• With larger transaction volume

• Marking the beginning of a new trend

Escape gap

Runaway Gap, also known as a measurement gap, appears midway through the trend. This gap indicates the strong and sustained current trend, usually accompanied by larger trading volumes. The emergence of the escape gap indicates that market sentiment has further strengthened and investors' confidence in the current trend has increased.

The characteristics of the escape gap are:

• Appears in the middle of the trend

• With larger transaction volume

• Indicates strong and sustained trend

Depletion gap

Exhaustion Gap appears at the end of a trend, usually marking the end of the trend. This gap is accompanied by a larger trading volume, but then the price reverses rapidly. The emergence of a depletion gap indicates that market sentiment has reached its limit and investors are beginning to take profits or stop losses.

The characteristics of the exhaustion gap are:

• Appears at the end of the trend

• With larger transaction volume

• The price then reversed rapidly

How to identify and exploit gaps

Identification and utilization of gaps requires combining technical analysis and judgment of market sentiment. Here are some specific steps:

• Observe price trends : First, observe the price trends and determine what trend the current market is in. The direction and intensity of the trend will affect the type and significance of the gap.

• Analysis of trading volume : Trading volume is an important indicator for judging the type of gap. Breakthroughs and escape gaps are usually accompanied by larger trading volumes, while ordinary and exhaust gaps may have smaller trading volumes.

• Combined with technical indicators : Use technical indicators such as moving averages, relative strength index (RSI), etc. to help judge the strength of the market and the sustainability of the trend.

• Observe the filling of gaps : Normal gaps are usually filled in a short period of time, while breakthrough gaps and escape gaps may not be filled. Observing the filling of gaps can help judge the type of gaps and changes in market sentiment.

• Formulate trading strategies : Develop corresponding trading strategies based on the type of gap and market sentiment. For example, breakout gaps and escape gaps can be used as buy signals, while depletion gaps can be sell signals.

Application of gaps in different markets

The gap has different applications and significance in different markets. In the cryptocurrency market, gaps appear more frequently due to their high volatility and 24-hour trading characteristics. Here are some applications of gaps in the cryptocurrency market:

• Bitcoin Market : The gap in the Bitcoin market usually reflects changes in market sentiment and the release of important news. For example, a breakout gap may occur when Bitcoin breaks through important resistance levels, while a depletion gap may occur when market sentiment reaches its limit.

• Altcoin Market : The gap in the altcoin market may be more susceptible to manipulation and short-term volatility. Investors need to combine market sentiment and technical analysis to carefully judge the type and significance of the gap.

• Futures Market : In the cryptocurrency futures market, the emergence of gaps may be related to the price trend of the spot market. Investors can formulate more comprehensive trading strategies based on gaps in the spot market and futures markets.

Actual case analysis of gaps

In order to better understand the type and significance of the gap, we can analyze it through some practical cases.

• Bitcoin breaks through the gap case : In October 2020, the price of Bitcoin broke through the important resistance level of $10,000, and a clear breakthrough gap appeared. Subsequently, the price of Bitcoin continued to rise, marking the beginning of a new uptrend.

• Ethereum escape gap case : In May 2021, Ethereum price experienced an escape gap in the middle of the upward trend, accompanied by large transaction volume. Subsequently, Ethereum prices continued to rise, indicating the strong and sustained trend.

• Bitcoin Depletion Gap Case : In April 2021, Bitcoin price experienced a depletion gap at the end of the upward trend, followed by a rapid decline in price, marking the end of the trend.