What is the primary action recommended when trading a runaway gap?

When trading a runaway gap, the primary action recommended is to buy at the higher part of the gap. A runaway gap typically occurs during a strong trending market and signals a continuation of the trend. This type of gap often indicates increasing momentum in the direction of the trend, suggesting that traders who missed the initial move have now been attracted to the market.

Buying at the higher part of the gap allows traders to take advantage of this momentum, as price tends to continue moving in the direction of the gap. The presence of the gap reinforces the bullish or bearish sentiment prevailing in the market, and entering a trade at this level aligns with the prevailing trend dynamics.

The rationale for this action is based on technical analysis principles that suggest gaps will frequently act as support or resistance levels in the future. In the case of a runaway gap, the price typically has strong upward momentum, making it a favorable entry point for traders looking to capitalize on the ongoing trend.