You are new to the stock market and do not understand some terms such as GAP, we invite you to read the following article about What is Gap?, where you can understand a little about this terminology.
What is a Gap about?
What is Gap?
First of all, we must say that the graphs are representations of numbers in a drawing or scheme, reflecting the relationship that exists between them.
The term Gap comes from «interval or interruption», that is to say, interval or interruption, it is used in financial language to name the space that is in a graph between the end and beginning of the day, where no commercial movement occurs.
Because of this, the chart presents a gap in the pattern of standard values, giving experts in the field a profit opportunity.
In general, this occurs when a new gap is opened, which usually begins at almost the same level as another one.
Why are the Gaps developed?
They can be divided into three factors, the first, the economic aspects can affect the entire market in a negative way, since the value of the currency falls or collapses in a period of time that can vary between days or weeks.
Second, the country's currency may fall due to a political event that is occurring in the country, and thus affect its value.
Finally, negative natural events not only represent a great human and material loss for the affected country or countries, but also affect the world stock market and the value of the national currency.
For this reason it can be said that the Gaps occur due to some relevant event, be it economic, political or environmental, in a country or countries, affecting and changing the value of its currency in a sudden way at the closing or opening of the stock market.
Forex gaps: what does it consist of?
It is an unusual difference in the price or value levels of a currency, that is, its closing value can have a large gap with respect to its initial value the next day.
Gaps: The types that exist today
Currently, there are various types of Gaps that we can find within the world of numbers and finance. The main ones are:
Common aperture gaps What is it?
The common gap is the most frequent gap in the stock market, since it occurs when prices show a minimum difference and close frequently, and can occur when the demand for negotiation is low.
Sometimes, these gaps can be known in advance, due to the news that occurs in the country. These changes usually occur on the weekend.
Since the world of securities is so fast-paced and changing in the world, gaps in forex gaps can be bridged more easily than common open gaps.
What is the breakout gap?
This type of Gap occurs when there is a break in the increasing value of the currency, usually after having a great value, initiates the modification of patterns or trends. Generally, it occurs when there is a large volume in the market.
Escape gaps, what is it about?
As escape or continuation gaps, those values that follow their rise or fall at the opening of the market are called. That is, if the price of a currency is rising and the market closes, once it opens again, this value will continue to rise.
Depletion or terminal gaps
This Gaps deals with the abrupt onset and subsequent fall or vice versa of the price of the currency. In general, the last three Gaps mentioned are grouped together and make up a complete Gap.
What is a Gap? Gap types
Can Gaps be formed several times a day?
Sometimes it can happen multiple times a day due to the change in the values of the currency going up or down. We cannot forget that this can be attributed to political, economic or environmental events, which may be happening in some country.
What is Gaps trading?
Gaps trading consists of the non-existence of the effect of listing, over a certain time and subsequent activation, with a change in its value. This has been the indication between the supply and demand of the currency.
Gap Trading: Foolproof Strategies
First we must say that traders are the people in charge of observing and making the buying and selling operations on the stock market.
With this in mind, traders use Gaps to analyze the market, as well as to indicate the price corresponding to a currency traded or what will be.
Due to this, traders have different strategies that they apply to achieve their work, which are: buying, selling or fading the Gaps.
Buying and Selling Gap When does it happen?
They occur after a wave of rumors about an event or event during the time that the market is closed, in this way the purchase or sale causes a great movement, achieving the rise or fall of the currency or shares of a country or company.
Fading the Gap: What You Need to Know
Another option is for traders to acquire a stake in the area other than the gap, assuming that the gap tends to "fill in" after a period of time. That is, the person in charge does everything possible to be able to stop losses by achieving a rise in values just before the market closes.
In general, investors observe the state of the Gaps in order to understand their variations and anticipate the rise or fall of the value of the currency. It is the break or escape gaps that indicate the trend to follow.
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How to work with a gap in the Forex market?
The first thing a person interested in generating Gap should do is analyze the behavior of the currency, generally, these movements are made during weekends, handling the closing price on Friday.
For the application of any work strategy with a Gaps, it must first be understood if they are negotiable or not, observing the graphs and movement of the values.
Once the Gap has been generated, observe their behavior and above all keep in mind the risks that this may entail.
What does it mean that a gap is up and down?
The values in the market are in constant changes, some are upwards, which means that their value is above the previous one. On the other hand, when the Gaps are presented downwards, it means that the value is below its previous value.
What's behind the Gap Theory?
Depending on the variation of the market, the price represents a level of support or resistance within it. This theory is a part of the meticulous study of the values, in turn it explains that the gap is eventually solved, in addition the value tests the state of the Gap before normalizing.
Remember that the Gaps are the gaps or gaps that exist in a graph where the values of a currency are reflected, therefore, this sometimes varies, technically this theory is not safe.
Sometimes a market that is going up can collapse due to an unexpected event, and this gap sometimes cannot be covered by the people in charge of valuing the price, that is, the traders.
Forex market hours
All currency markets have a specific schedule to start their daily work, which begins on Sunday at 23 p.m. and ends on Friday at 22 p.m., being open 24 hours a day, due to demand and supply.
During these hours, there are periods that present greater demand for currencies by the participants, that is, businesses, companies, hedge funds, companies, banks, investors and more, which demand a greater amount of currency during the closing day in the night and during the opening hours.
This schedule also allows interested people from all over the world to enter regardless of the country where they are located.
The days that the currency market does not work, are those holidays that are celebrated all over the world, on the same dates as New Years, July 4 in the United States, July 14 in France, December 31 and 24 and the Moon holiday in Asian countries.
Stock markets
Who participates in the stock market?
All those investors, companies, hedge funds, businesses, banks, management companies, people who exchange currencies or stabilize the value of the country's currency, participate in the different currency markets.
All this under the changes that the region may present at an economic, political or natural phenomena level.
Is the stock market the same as the stock market?
Understanding everything related to the stock market and the stock market is generally very complicated and more so for those people whose environment is not closely involved with this. We think that the stock market and the stock market are the same, but they are not.
The stock market comprises a type of international market used by companies and citizens who invest securities generating profits or capturing resources from those who have them available. It is the most liquid market in the world.
On the other hand, the stock market is a private entity that offers its services to those who want to sell and buy securities, be they stocks, certificates, bonds or titles, as well as various items to invest. This allows them to manage money in the long and short term.
The marked difference between these two is the fact that the forex market works 24 hours a day, throughout the working week.
For its part, commissions in the foreign exchange market are high compared to the stock market, since it handles small operations, whereas the foreign exchange market focuses on large operations of companies and countries.
All these aspects vary according to the needs that are had and above all, the point of view and goals that the people or investor want for their future.
Stock Exchange: Origins
The beginnings of the stock market took place in Belgium during the XNUMXth century, in a building of the noble Van Der Buërse family, where they made influential financial movements for the time.
They began to call it a bag due to the shield that they placed on the door of the property, it had three small purses in the shape of a bag, made of leather.
The first stock exchange that existed, which is older than others in the world, is located in the Netherlands and was established in 1602.
It was founded by the Dutch East India company to raise funds used for business trips, making it the most powerful company dominating Asia and the Netherlands.
In this way, the growth of the stock exchanges worldwide began, reaching the point that each country has one in its territory.
Among the stock exchanges, the most important are: the Shanghai, Bombay, Hong Kong and Tokyo stock exchanges in Asia, London and Madrid in Europe, New York in America, and the Australian stock exchange in Oceania.
Fall of the World Stock Market.
Stock market crash
The stock markets suffer falls in their indexes, due to various political, economic, terrorist and environmental factors, which can occur around the world. Since its creation, the stock market has suffered six major crashes that have marked its history:
Wall Street: The Main Fall of the US Market
One of the most important was the Wall Street crash in 1929, in which the New York Stock Exchange was involved, becoming the most relevant and long-standing event in the US market.
This drop was caused by investor greed after strong economic growth in Europe and the United States. The peak was on October 24 after placing 12,8 million shares for sale on the Wall Street stock market, immediately collapsing and starting Black Thursday.
Black Monday: Speculative Bubble?
Years later, in 1987, Black Monday occurs, also known as the stock market crisis. Being one of the worst days, it affected the stock market worldwide.
According to experts, this happened due to a speculative bubble and the high value of the dollar in the market.
Stock market crisis How did it happen?
In 2.008, a bill for the American bank bailout was introduced which triggered the stock market crash of that year, known today as "The Recession."
US Flash Crash: Fastest Market Crash
During the year 2.010, in full elections in the United Kingdom and the debt that Greece had, the American banking collapsed in a surprising way, returning to its initial value after a few minutes, occurring at a speed never seen before, it was given the name by Flash Crash.
OPEC collapse: How is it related to COVID-19?
And finally, the most recent fall was in the year 2.020 due to the global pandemic COVID-19, when the collapse that crude oil had been experiencing since 1.991 reached its collapse, initiated with the price dispute over Saudi Arabia.
Also known as the collapse of OPEC, it was generated by the low demand that crude oil was having worldwide, due to the social restrictions that were presented in all countries as a measure of isolation and control of the pandemic.
This virus started in China in the middle of the year 2.019, but it was taken as pneumonia from an unknown virus, shortly after, cases and deaths began to be known in other countries.
This began to generate chaos worldwide, leading to most countries closing the entrances and decreeing social isolation, as well as restrictions on airports, especially the countries with the highest percentage of contagion.
Worldwide, the economy began to decline reaching the level, that an endless number of companies and companies were affected, having to close their doors, as well as the closure of some stock exchanges. In mid-March the impact on the stock market was very evident, initiating a period of recession never before seen in history.
These crises in the stock market are known as the "Black Swan", since they are an event or group of events with a negative influence on the economy and that are unavoidable.
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The stock market today.