What is Gap Up/ Gap Down Trading in India?

A “price gap” occurs when a stock opens at a price that is significantly above or below the previous session’s trading range, leaving a gap on the price chart. In other words, a gap up occurs when the opening price is above the previous session’s high.

For example:

• Previous high: ₹500
• Current opening price: ₹515

Now, the stock has opened ₹15 above the previous session’s high. Such a gap up can result from earnings announcements, corporate news, market-wide events, or changes in investor expectations.

In comparison, a gap down occurs when the opening price is below the previous session’s low. For example:

• Previous low: ₹500
• Current opening price: ₹485
• The stock has opened ₹15 below the previous session’s low.

Gap Up and Gap Down Trading in India

To perform a gap up and gap down trading in India, traders may examine:

• The size of the gap
• Trading volume
• Market trend
• News, and 
• Subsequent price movement

During the analysis, traders may also observe that some gaps are followed by a “continuation” of the price move, while others may partially or fully close during the session. However, a gap by itself does not establish the direction of the subsequent move.

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