A sudden gap in price can feel like a missed opportunity or a trap. But for traders who
understand how gaps behave, they are neither. They are setups waiting to be interpreted. In
the world of Share CFDs, price gaps offer structured trade entries with measurable risk and
reliable behavior patterns.
The Nature of Price Gaps in Equities
Gaps occur when there is a significant difference between the closing price of a stock and its
next opening price. These often happen after earnings reports, news events, or broader
market developments. While traditional investors might see them as volatility spikes, traders
see something else—a reaction followed by a potential resolution.
With Share CFDs, gaps are particularly important because you can trade them in either
direction. A gap up that fails to hold may become a short opportunity. A gap down that is
quickly reclaimed can signal a bounce. This flexibility is one of the key reasons traders prefer
using Share CFDs for short-term gap strategies.
Common Gap Types and What They Tell You
There are several categories of gaps, each with its own implications. Breakaway gaps signal
the start of a trend. Continuation gaps appear mid-trend, confirming direction. Exhaustion
gaps often signal the end of a move. The type of gap determines how you should approach
the trade.
Traders using Share CFDs can capitalize on all three. For example, if a gap appears after a
long run-up and stalls quickly, it may signal exhaustion. Entering a short trade with a stop
above the high of the gap becomes a clean and risk-defined opportunity.
The Psychology Behind the Move
Gaps are emotional. They reflect fear, excitement, and mispricing all at once. Many traders
overreact during the open, either rushing in or exiting too soon. But the most disciplined
traders wait. They watch how price behaves in the minutes or hours after the gap.
With Share CFDs, this waiting game becomes manageable. You can observe from the
sidelines and plan your entry based on price structure rather than emotion. If price fills the
gap and then reverses, you trade the rejection. If it holds and extends, you ride the breakout.
Fading the Gap vs. Trading the Continuation
Two classic gap strategies involve fading the move or trading in its direction. Fading works
when the gap appears overextended and lacks volume. Continuation plays work best when
volume supports the move and price consolidates rather than retraces.
Traders using Share CFDs can apply either strategy with flexibility. If the first move fails, you
can exit quickly or even reverse your position. You are not locked into a single direction or
investment size, making it easier to respond to how the market evolves.
Why Gaps Are More Than Just Morning Moves
While gaps are most visible at the open, they often create trade setups that develop
throughout the day. The high or low of the gap zone becomes a key level. Many intraday
traders use these points to trigger entries later in the session when the initial volatility fades.
Using Share CFDs, these setups can be managed with clarity. You can mark the gap zone,
wait for confirmation, and trade with defined risk. This reduces noise and keeps your
approach consistent.