The core logic of gap trading

Gaps reflect a significant shift in supply and demand. When the price jumps without passing through the previous range, it indicates that one side's buying or selling force is strong enough to bypass the intermediate price levels and directly push the price higher or lower. This reveals the market participants' aggressive willingness.

So the question is—after a gap forms, what will the price do next? This is the key area traders need to focus on.

The price behavior near the gap can tell a lot. Sometimes it will move back to fill the gap, indicating a lack of original momentum; other times, it will find support or resistance at the gap and continue in the original direction, signaling that a new supply and demand balance has been established.

Learning to judge the strength of the gap and the subsequent price reaction is the key to understanding market turning points. This is an essential reference signal for short-term trading and swing trading.