BALTIMORE (Stockpickr) -- As a trader, gaps may well be one of the most challenging things you'll find on a chart. That's because as common as these missing spots in a stock's price may be, it's clear that they're sorely misunderstood by all manner of market participants.But it doesn't have to be that way. Instead, gaps can provide a wealth of information about how a stock's behaving and even signal trades to in-the-know investors. Today, we'll dive into the gaps for a trader's eye view of how to handle them. Related: Does Technical Trading Really Work? To start, we should define exactly what a gap is. Simply put, gaps are missing chunks on a stock's price chart where prices move through, but no shares traded. They can occur for a bevy of reasons, but common catalysts for gaps include major news (often outside of trading hours) or serious sentiment shifts. The chart of Cisco ( CSCO - Get Report) below gives two good examples of conspicuous gaps. You won't see all gaps on traditional daily candlestick charts such as Cisco's. That's because gaps also occur intraday but appear as part of an individual candle. For most traders, that's not a major issue -- the most technically significant gaps are the ones that show up on your trading time frame of choice. One big myth that needs to be clarified from the get-go is the misconception that all (or most) gaps are eventually filled. A number of independent analysts have shown that trading strategies based on that assumption are woefully unprofitable. Don't fall for it.
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