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Difference between measured moves, measuring gap, and exhaustion gap
Hi guys, i was wondering if you could explain to me the difference between a measured move and a measuring gap. It appears to be the same thing? I see the word "gap", so i keep looking for some sort of a gap but i generally don't see any. I keep looking for something that distinguishes the two but i'm not seeing anything.
The exhaustion gap might be a little different but i'm still having trouble understanding what this is. Could someone clarify? Thanks!
Someone could explain but, why ask here what you have thoughtfully explained in the course? The forum is a poor substitute for the info gathered in the course. Go there first always, you won't regret it!
In general, measuring gaps are used when the trend is strong and you assume that there will be follow-through, or you believe that the market has started a always in mode situation. In other words, you assume that breakouts will be successful and lead to the measure moves.
Impulse and channel pattern- measure move based on the size of the first leg - Leg 1 (spike) = leg 2 (channel) (sometimes the channel gets truncated, and you don't see a measure move, on the opening the spike sometimes fails and leads to measure move counter trend (reversal).
Trending Trading Ranges- measure move based on the height of the previous range.
Trend Resumption Day - you get a measure move starting on midday or final third.
Body Gap - there is overlap between the shadows but not between bodies, usually when the trend shows signs of two sided trading and is not as strong as it could be, i.e trending trading ranges.
Exhaustion gaps you see when you believe the breakout will not be successful and may lead to a pause or reversal. In general when the trend is old. Channel Failed Breakout by large late trend bar. Failure breakouts from Final Flags. Vaccumm tests on major support and resistance areas/2º leg traps on trading ranges, etc.
Opening gap - can lead to measure moves with trend or counter trends (reversals), yeasterday patterns, context and momentum will tell what gap type will be.
In summary, every trend bar is a gap
measuring gap = good follow-through = measure move is the outcome
exhaustion gap = bad follow-through = potential reversal or pause is the outcome
opening gap = can be both