Market Profile Trading A to Z
Glossary assembled by Andrew Hall, iTradePod. If you have any feedback or would like to see a term added or amended please leave a comment below or contact us.
Gap - a form of breakout excess that indicates that the market is imbalanced and that the prior value area is being rejected. We consider two types of gap: a Full Gap and a Partial Gap; A Full Gap Up occurs when the opening price is greater than yesterday's High of Day (pHoD) price. A Full Gap Down occurs when the opening price is less than yesterday's Low of Day (pLoD) price. A Partial Gap Up occurs when today's opening price is higher than yesterday's close (pClose), but not higher than yesterday's High of Day (pHoD) price. A Partial Gap Down occurs when today's opening price is lower than yesterday's close (pClose), but not lower than yesterday's Low of Day (LoD).
Of the different types of gaps that we consider, it is the Full Gap that above all confirms that a market is trending out of balance. Well-timed trades in the direction of the Full Gap offers a high reward low capital exposure trade when used in conjunction with key reference levels derived off the Market Profile® graphic and Order Flow execution confirmation.
For more on how to trade gaps using Market Profile® and Order Flow please read the How To Trade Gaps (coming soon) article.
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