Good day, readers of the blog about trading. Gap, or price gap, or window (in candlestick analysis), whatever you like, depending on where it occurs in the trend, carries different information for the swing trader. It can indicate to you the beginning of a new powerful movement in the price of a stock, whether the trend will continue or reverse. Such high information content that a gap carries makes it a valuable graphic element.
On this page we will analyze what a gap is, how to analyze a gap, and most importantly, I will tell you which gaps are formed by professional traders and which by beginners.
This is a price gap on a chart where no trading took place. It can appear on any timeframe, but as swing traders we prefer the daily one.
A gap on a daily chart occurs when a security opens above the high (or below the low) of the previous day. Why is this happening? Because sellers or buyers en masse place buy or sell orders before the market opens. As a rule, this happens when important news comes out. Let's look at an example:
AOL had a daily high of $27.96 ahead of its earnings report. Their report exceeded expectations and caused excitement among investors. Buy orders began to be placed before the opening of the trading session. AOL opened the next day at $28.19 and went up. The result was a price gap of 23 points, where there were no transactions. This is the gap.
Sometimes we hear a phrase like “filling the gap” or “the gap has filled.” What is it about?
When a stock trades within the previous price gap, we say the gap has filled. Look at the example:
For over a year, the price gap served as a resistance level until it was broken. Then the gap began to rapidly fill.
In candlestick analysis, price gaps are usually called windows. When a gap fills, the Japanese say “the window is closing.”
Some traders say that gaps always fill. Others deny it. I don't think this topic is worth arguing about. I just want to say: there are price gaps that fill over a long period of time, as well as those that do not fill for years. Maybe the latter needs more time? It's not that important.
Depending on where price gaps appear on the chart, there are 3 types:
We have come to the main topic of discussion. When a price gap appears, it is important to understand who created it. If professional traders are behind this, then you can be sure that the trend will continue. If it was formed by novice traders, then most likely the trend is approaching a reversal.
First, remember one thing. Professionals buy after a wave of selling has occurred and sell when a wave of buying has passed. That is, this is the initial phase of the trend after a reversal, or breakdown of the level.
Beginning traders do exactly the opposite. When the price has been moving up for several days, they are afraid that they have missed a good opportunity and start buying. At this time, professional traders are already selling.
Here is an example of a gap formed by novice traders:
As you can see, emotions dominate here – they are not a trader’s best friend. Purchases are made after several days of growth in a row at the end of an upward trend.
Here's an example in the opposite direction:
The second price gap occurred at the beginning of the trend and was immediately followed by a rapid rise in the share price.
Now let's derive the rules:
Gap is an excellent indicator of the direction of price movement. It gives us great opportunities, like swing traders: they indicate the emergence of trends and the achievement of extremes. And it’s based on the psychology of different traders. Trading Blog thanks for your attention. Leave comments on the topic of the gap and its analysis. Trade wisely!
Strategic management includes many expert methods for assessing the activities of an enterprise. Especially if we are talking not only about the current state of affairs, but also about potential changes in the internal and external environment. Thanks to such events, companies manage to survive crises, increase their profits and find new opportunities.
This article will discuss the GAP analysis technique. It is included in the range of techniques of a modern manager and allows you to control the situation quite effectively. However, before immediately moving on to studying what the strategic analysis method is, it is worth paying attention to where it is used. More on this later in the text.
If we avoid quoting verbatim from various textbooks and cover this topic as informatively as possible, then we will talk about long-term planning and management.
Strategic management is a very broad concept; it is studied in universities and used in business. It is worth noting that this is a fairly effective technique that can be intertwined with other areas of economic sciences, for example, with risk management or organizational management. There can be a lot of points of convergence, which makes this discipline very relevant today.
Often, strategic management is used in large corporations that can afford to make long-term plans for the release of any specific product, prepare for expansion and develop new markets.
To implement such planning, not only human and financial resources are required, but also the possession of a sufficient amount of information. Because of this, long-term forecasts are often said to be ineffective due to environmental variability. Next, one of the techniques that is used in strategic management will be described.
It is often called the "strategic analysis method." If you translate a foreign name, you get a word that means a gap. And the essence of GAP analysis is precisely to study the gap between the planned result and the current one. In other words, it studies the gap between the actual and the desired. The technique is used quite widely and allows you to analyze completely different parameters, such as sales for a given time period or the achievement of any goal, for example, the introduction of a new quality system at the enterprise. There are a lot of possible applications, and the only limitation can be the specifications of the analyzed structure.
The registration process itself can be displayed in free form and will depend on the current activities of the company and the situation. It is possible to use graphical methods or tables.
These situations are just examples and can be replaced by any others.
The specified matrix only reflects the essence and stages of GAP analysis, which include various formulations.
First of all, the enterprise must determine the fulcrum, that is, it is necessary to determine the state where the company is at the current moment in time. The same applies to its resources in a specific period of time.
The next stage will be the selection of criteria for your GAP analysis, this can include both the work of a full-fledged structural unit and any competitive product or service, in our case, for example, one of the gap criteria is a situation where “Subscribers are dissatisfied with too high tariffs" taken from the above table.
And of course, the last stage is the selection of an idea or initiative to solve this issue, in our case the gap.
The GAP analysis technique is very mobile. It can be used almost anywhere there is a time period, current and planned situations. Perhaps there are experts who use the principles of GAP analysis, diluting them with complex expert methods, mathematical calculations and much more.
However, management is a fairly flexible science. This means that the essence and stages of GAP analysis will not change from the addition of economic and mathematical modeling methods.
This analysis can be carried out both by working with product sales plans and by comparing your company with competitors. It all depends on the imagination of the manager or leader, because the gap technique is so simple that it can be used to compare the work of two similar departments in the same organization.
Since the technique is relatively simple, it will also be an excellent solution for new companies that are just entering the market. They are able to evaluate many factors, which will allow them to take root in the market.
When working with a competitive environment, there are other equally effective mechanisms, for example, the Porter matrix or SWOT analysis. Their use will depend on factors such as the type of activity of the enterprise, the number of employees and the number of other organizations in the market.
However, we should return to the concept of “competitive GAP analysis”. This technique will require studying your own current advantages and the extent to which competitors lag behind them. In other words, the capabilities of competitors and the real state of affairs in our company are compared. It is very important to remember that you should choose criteria and gaps in accordance with your type of activity, and the GAP analysis method itself is only a template for making decisions.
Very often, graphical techniques are used to compare the current situation, display the gap itself, and also show potential opportunities.
With this approach, there are no uniform rules and principles; the main thing is to display on the graph the very essence of the problem and the gap itself.
The GAP analysis technique is so universal that it can be used in everyday life. It allows you to point out those factors that were not enough to achieve the goal.
So, the basic principles of conducting GAP analysis are an understanding of what factors the gap is being sought between. For example, if we are talking about sales, then let it be the current number of sales and a specific goal in the future.
If we are talking about introducing new equipment, then again you need to outline the current situation and the desired one.
In general, almost any information can be taken as the abscissa (x) and ordinate (y) axes when conducting GAP analysis. The main thing is that it correlates with each other and carries meaning.
Sometimes conducting a GAP analysis can show that there is no gap between competitors or strategic plans. If all the criteria were correct, and the analysis itself also included calculations and other factors, then this means that the enterprise is managed extremely efficiently and there is no need to take any steps to fill the gap.
If a gap is found, then you need to determine the extent of the lag from the strategic plan, conduct an internal audit of the company, and perhaps somewhere you will have to shift the deadlines. The most important thing is not to harm the company.
One of the positive features of this technique can be said that it is quite universal. In general, the GAP analysis technique is simple and common sense, which can be displayed on paper.
The techniques described in it are suitable for both very small companies and large giant firms.
GAP analysis of a company, coupled with other methods, will help you find the right vector of behavior for the company, as well as carry out competitive activities in your market.
However, such methods have disadvantages. Even if gap analysis is used in conjunction with other, more cumbersome statistical and mathematical methods, there will be no guarantee that the correct vector has been specified and the area of potential problems has been correctly identified.
This is due to long-term planning periods, which typically last more than two years. The situation in any market can change so quickly that any data quickly loses its relevance.
It is not necessary to specifically conduct a GAP analysis, especially in flexible management situations. In management there are a sufficient number of ways to find and solve a problem, as well as increase the efficiency of the managed system.
Obviously, SWOT analysis allows you to assess both the internal environment of the company (weaknesses and strengths), as well as the external environment (opportunities and threats).
Another interesting technique; it will not replace GAP analysis, but it can correct your results when performing it. The essence, as it happens, is hidden in the very name of this method.
It allows you to assess the external environment of a company by analyzing four different parameters.
The political component lies in the first letter of the name of the method; here the manager must describe all the factors that can in one way or another affect his product, organization or consumer as a whole.
Next, they describe the economic state of the external environment, i.e. various crises or potential large-scale projects. If this environment does not in any way affect the situation with our company, then some point is simply skipped.
Social component. Well, in this case, everything is quite simple, the state of society as a whole is described, for example, mass holidays are sometimes included in this paragraph or left blank.
The GAP analysis technique is another effective way to assess the state of affairs in your organization. In addition, along with other methods, it allows us to give a competent assessment of what is happening both in the internal and external environment.
This method of strategic analysis can not only show problem areas of strategic planning, but also propose a number of initiatives to solve specifically stated problems both in the current period and in the future. In other words, it can also be used in operational management.
In addition, foreign experience in using GAP analysis shows that the technique is quite effective. On the Internet you can find frequent references to the use of this technique by large consulting firms and IT corporations.
However, you should not make decisions based only on a “bare” GAP analysis, especially given the availability of tools such as the Porter matrix, SWOT analysis and other equally useful techniques. However, each method has its own goals and objectives that help organizations develop.
One of the well-known methods of strategic analysis is gap analysis, or GAP analysis. gap– gap). When setting strategic goals, it is necessary to compare the formulated, desired goals with the realistically possible ones, i.e. determine the gap, discrepancy between these goals. GAP analysis is aimed at identifying such gaps, contributes to setting realistic goals and developing specific measures to eliminate (reduce) such gaps. With its help, you can organize a search for steps to achieve a given goal, determine the trajectory of transition from the achieved level of achieving a goal to the desired one. The condition for using this method is the existence of a gap between the desired and possible levels of achieving goals.
Figure 4.16 illustrates the content of the gap analysis of the sales increase problem. The management of a certain company has set a goal to double its sales volume over five years, bringing it to 30 million rubles. The long-term forecast of experts put the figure at 20 million rubles. Thus, a gap emerged equal to 10 million rubles. An analysis carried out by experts showed that the so-called operational gap can be closed through the following two groups of measures.
However, these measures do not close the strategic gap. Its reduction is possible due to:
Rice. 4.16.
The following technology for conducting gap analysis can be proposed.
1. Determination of the object of application of this method.
These are objects of different levels (country, region, company, its divisions), whose activities are characterized by various indicators, measured quantitatively using certain methods, or some single indicator (market value of the company, sales volume, percentage of loyal consumers, birth rate etc.), or an integral indicator (an integral indicator of quality, some kind of rating, etc.).
2. Determining the desired level of achievement of the goal.
Often such goals are set by the organization’s management to its employees without sufficient justification. Determining the desired level of achievement of a set goal begins with a forecast of the state of the organization for the planned period using expert assessment methods or using mathematical forecasting methods. This technology allows you to assess what position your organization could occupy and calculate all the possible benefits that it would receive as a result of achieving the desired goal.
3. Based on the use of calculation and prognostic methods, often extrapolation, expert assessment methods, determining the possible achievable value of the goal (Fig. 4.17).
Rice. 4.17.
4. When the desired value of a goal is greater than its achievable value, the gap between them is determined.
In this case, the reasons for the rupture are analyzed. The gap between the desired and possible levels of achieving the goal by year of the period under consideration is detailed. If the possible achievable value of the goal exceeds its desired value, then there is no need for GAP analysis. Management simply did not take full account of the organization's capabilities; it is necessary to adjust the goal towards its greater value.
5. Identification of factors determining the occurrence of a gap.
The general gap is divided into specific gaps, the occurrence of which is due to certain factors (lack of finance, ineffective use of promotion methods, unreasonable pricing policy, strong level of competition, unfavorable demographic situation, etc.). All factors should be divided into controllable and uncontrollable. Gap analysis considers only controllable factors, the influence of which is possible only within the framework of the activities of the organization for which the gap analysis is carried out.
6. Analysis of the influence of individual factors and the possibility of improving their values in order to eliminate (reduce) the gap.
A descriptive and, where possible, a mathematical model of the influence of individual factors on particular gaps and the gap as a whole is compiled. The information necessary to assess the degree of influence of individual factors on individual gaps and on the overall gap as a whole is collected. For example, a model of the demographic situation is compiled and how this model affects the personnel capabilities of expanding production is determined.
7. Determining the possibility of reaching the desired level of achieving the goal.
In the process of assessing the existing gap, it is necessary to find out to what extent the gaps can be closed. The possibilities of influencing factors of the micro-external and internal environment are determined in order to bridge the gap. Macro-environmental factors do not appear to be subject to influence. Various options for the development of these factors and the level of their influence are taken into account as certain given initial conditions, within the framework of which actions to bridge the gap are planned. If the gap is too large to overcome with the help of your own or attracted resources, it is advisable to either reconsider the desired goal or break its achievement into several stages, increasing the total period of time to achieve the desired level of the goal.
It is also possible that the possibilities will exceed the previously set desired goals. In this case, adjustments are made to the set goals in the direction of choosing a higher level of their achievement.
8. Drawing up an action plan to eliminate (reduce) the gap.
The selected goal is translated into the language of specific activities, separated into separate periods of time, their performers, the deadlines for completing individual planned tasks, the resources necessary for this and the sources of their receipt are determined. The set of such actions is quite well known and is described in many marketing publications. The main thing is to choose those that correspond to the situation under consideration.
Approaches to obtaining the initial data necessary to identify groups of factors (individual factors) influencing the occurrence of gaps, methods and sources for obtaining them can be borrowed from the SWOT analysis methodology. We are, of course, not talking about all the factors of SWOT analysis, but only about those that influence the occurrence of gaps.
From the above it follows that the scope of possible application of this method is very extensive. It includes all kinds of organizations at different levels of management of the national economic system. In their activities, especially when developing strategic plans, the task of setting goals for achieving certain values of certain indicators arises, for example, doubling GDP, increasing the birth rate, achieving a certain value for indicators of market share, quality level, competitiveness, reducing inflation, etc. Using the gap analysis method involves setting quantitative goals.
TO merits Gap analysis methods include the following:
At the same time, this method of analysis has the following disadvantages:
In addition to expert assessments, extrapolation forecasting methods are most often used when analyzing gaps. When they are used, past experience is used as a forecasting base and extended into the future. The assumption is made that objects and processes (country, industry, competitor organization, demographic
and market processes, etc.) develop evolutionarily in fairly stable conditions. It is usually recommended, as we said earlier, that the forecast period should not exceed one third of the duration of the estimated time base. However, in practice there are quite a lot of cases when, based on a time base of, say, five years, extrapolation forecasts are developed for 10–15 years. What accuracy of the forecast can we talk about in this case?
Most forecast errors when using extrapolation methods are due to the fact that at the time the forecast was formulated, it was more or less explicitly implied that existing trends would continue in the future. This is rarely observed in real economic and social life.
There are many examples of erroneous recommendations made based on the use of extrapolation methods. These errors in the forecasts were not of a mathematical, but of a purely logical nature: after all, the forecasting used time series that fairly well reflected the statistical material available at the time of the analysis.
The development of society is determined by a very large number of factors. They are closely related to each other, and not all can be directly measured. In addition, as society develops, sometimes unexpectedly more and more new factors begin to come into play, which previously did not influence the dynamics of the forecast object.
Time series may become an increasingly unreliable basis for developing forecasts as a country's economy becomes international and increasingly exposed to international factors. Without a good knowledge of the key factors influencing the dynamics of the studied parameter, their possible changes in the future and an assessment of the sensitivity of the predicted parameter to changes in factors, it is not possible to determine the predicted value of the studied parameter, and therefore the size of the gap, without major errors.
The above in no way detracts from the importance of extrapolation methods. Like any methods, you need to know how to use them. First of all, extrapolation methods should be used to determine breaks in a relatively short time interval of development of fairly stable, well-studied processes. Gaps should be determined on the basis of optimistic and pessimistic assessments of changes in initial factors, thus obtaining optimistic and pessimistic assessments of the predicted indicator. The actual forecast estimate usually lies between them.
In gap analysis, a forecast estimate obtained on the basis of extrapolation methods is used as an indicator of the possibility of obtaining a certain value of the forecast indicator. Let's assume that a forecast estimate of the sales volume for some product has been obtained. It says that under the same environmental conditions, structure and strength of the initial factors, the predicted value will reach such and such a value by a certain point in time. Managers who use the results of this forecast should answer the question: “Are this sales volume satisfactory?” If yes, then you need to make every effort to keep everything unchanged. If not, then there is a gap and it is necessary to use marketing and other tools, as well as try to influence certain environmental factors that can be indirectly influenced (for example, influence the activities of intermediaries, lobby for changes in certain tariffs, import duties). All these activities are aimed at ensuring that the desired sales volume is achieved.
Often when setting strategic goals, people are confused by the serious gap between what they “imagined” and what actually is. Taking such a gap too seriously leads to “mundaneity” when choosing goals and uncertainty in achieving them. Using gap analysis, you can find a path from the current state to the desired one.
Let's consider one of the most effective methods of strategic analysis - gap analysis, or GAP analysis (the English word “gar” means “gap”). With its help, you can organize a search for steps to achieve a given goal.
How is this method of analysis applied to the problem of increasing sales? If a company has chosen this parameter as a strategic goal, then achieving it can be approached in different ways:
| Demand | Gap | Initiative |
| Hypothetical | Disadvantages of goods |
|
| Full | Disadvantages of the sales system |
|
| Disadvantages in using the product |
|
|
| Competitor companies |
|
1. Determine the current value. Gap analysis begins with a forecast of the company's condition for the planned period using the method of expert assessments or using mathematical forecasting methods. This stage allows you to assess what position your company could occupy and calculate all the possible benefits that it received as a result of making certain decisions.
2. Determination of the maximum available value. In the process of assessing the existing gap, it is necessary to find out whether it can be overcome at all? If the gap is too large to overcome using your own resources, it is advisable to either reconsider the desired future, or break its achievement into several transitional stages, or stretch the process over a longer period of time.
3. Selecting the criterion by which the review will take place. As part of this stage, it is necessary to break down the overall gap into components that correspond to each significant functional, sectoral, territorial and other areas of activity along which planning will subsequently be carried out.
During this breakdown, sets of needs are identified and grouped into main categories. Thus, each section of planning represents a group of needs that has an impact on bridging the gap between the present and the future. Groups of possible needs may include information, communication, financial marketing, administrative, technical, etc.
4. A set of plans (initiatives) to achieve. Sources may be employees of various services, distribution channels, competitors, government agencies. Market-oriented sources identify opportunities based on consumer wants and needs. Research-oriented sources identify opportunities to create new products based on basic research. In this case, methods for generating ideas may include brainstorming, surveys, questionnaires, etc.
Example: conducting a gap analysis for the Moscow Confectioner company. We will use the gap analysis method to develop a market capture strategy for the company. Let’s assume that of the 12 million people living in Moscow, 75% are potential consumers of the company’s products (with the exception of small children, diabetics and people looking after their health), and the potential market capacity is 9 trillion. rub.
Accordingly, let us assume that each consumer can buy 1000 rubles worth of confectionery products per year. Consequently, we are potentially shortfall by 3988 billion rubles. or we miss 8940 million consumers. To increase your market share, you need to focus on several areas and carry out a number of activities.
An example of developing a strategy for the Moscow Confectioner company based on the results of gap analysis
Gap Analysis is a comprehensive analytical study that examines inconsistencies and gaps between the current state of the company and the desired one. This analysis also allows us to identify problem areas (“bottlenecks”) that impede development and assess the degree of readiness of the company to make the transition from the current state to the desired one.
These gaps may generally include:
· The gap between the company's market supply (in the broadest sense) and the existing level of demand in the market
· The gap between current activities or business processes and their characteristics, and the vision of how it should be ideally or from a management point of view.
· The gap between the actual goals and objectives of the company as a whole and employees in particular on the one hand and, on the other hand, the theoretically necessary goals and objectives
· Gap between current performance and industry best performance (benchmarks)
Talking about GAP analysis, as a rule, understand a set of activities that allow one to draw conclusions about the discrepancy between the internal marketing environment and the external environment or about internal inconsistencies. This may be, for example, between the plans of management and the understanding of the performers, as well as the inconsistency of the assortment with the structure of demand, the inconsistency of products with similar products of competitors, the inconsistency of the perception of the product and its individual qualities in comparison with the perception of competitors’ products, we can also talk about GAP analysis differences between brand identity and brand perception.
Target GAP analysis is to identify those market opportunities and company capabilities that can become effective market advantages for the company.
In other words GAP analysis allows you to maximize the internal potential of the company (underutilized, hidden), making maximum use of external opportunities. Besides, GAP analysis allows you to resolve problematic situations within the company, resolve conflicting demands of departments, for example, technologists and marketers.
GAP analysis can be used both in everyday practice in order to increase the efficiency of certain areas of the company, and in the process of strategic planning. In the latter case, the use GAP analysis the most effective, as it allows you to realistically assess the achievability and effectiveness of planned goals and objectives before they are agreed upon, approved and financial resources are allocated for them.
GAP analysis this is a comparison of the current situation in the organizational structure of the enterprise with the desired state of affairs in the future, as well as, based on the collected information, an assessment of the possibility for the organization to understand ways to achieve goals and their fundamental achievability. First, an improvement scheme is outlined, then the desired state is developed (from the point of view of external and internal customers). At the next stage, a detailed program for the company’s development in the desired direction is developed. In simple cases, it is enough to develop a sequence of actions (1, 2, 3...), in more complex cases it is necessary to use more complex organizational forms - project groups, testing solutions, developing various options, layouts, etc.
First, a forecast is developed regarding changes in the volume of demand and (or) supplies of raw materials in the future. If the forecasts are ambiguous and allow for multiple options for the development of events, then for each option it is necessary to develop a separate scenario.
The most commonly used version of GAP analysis is to bridge gaps between raw material supplies and sales.
Types of breaks
· Quality of products, service
· Organizational
· Business management
· Business processes
· Information Technology
GAP analysis (“variance model”) of service quality assessment
There are not as many service marketing concepts as may seem at first glance to an inexperienced marketer or researcher. Among the most popular is the so-called " GAP analysis", or "divergence model". Simplified, the model looks like this:
Simplified GAP model for assessing service quality
The essence of this model is to identify the strategies and processes that a firm can use to achieve excellence in customer service. A concept that is simple in concept, however, becomes difficult to apply in practice. The service perception element is actually a function of many variables, both controllable by the company and uncontrollable. And it turns out that the “elementary” discrepancy discussed above is just the tip of the iceberg. In fact, the structure of the model is complicated by the corporate environment, elements of which are reflected in the figure.
Extended GAP model for assessing service quality
The central element of the gap model is the “consumer divergence”, which consists of a mismatch consumer expectations And service perception- key concepts of services marketing. Accordingly, the main task of the company is to reduce this discrepancy in order to satisfy the needs of customers and build long-term relationships with them. To do this, the company needs to reduce the remaining “divergences” in the area of corporate governance:
· Discrepancy 1 - ignorance of consumer expectations
· Discrepancy 2 - insufficient customer-oriented service standards
· Discrepancy 3 - failure to meet service standards
· Discrepancy 4 - discrepancy between actions and promises
strategic analysis of the company's condition
