Chartered Market Technician (CMT) Practice Exam

A Common Gap, also known as an Area Gap, is characterized by its lack of significance and occurrence during normal trading conditions. These gaps typically happen within an established price range and do not signal a break in the trend or a shift in market sentiment. Instead, they are often viewed as minor fluctuations in the price and tend to fill quickly, meaning prices return to previous levels shortly after.

Common Gaps occur frequently in charts and can appear in both bullish and bearish environments, reflecting normal market activity rather than significant buying or selling pressure. Because they do not indicate a strong directional move or a change in market psychology, they are deemed less important than other types of gaps like continuation or breakaway gaps, which signify stronger trends and potential reversals. This understanding is crucial for traders and technical analysts as it helps in determining which gaps to monitor more closely for potential investment opportunities.