Price Gap
A price gap is a jump between one candle's close and the next candle's open, leaving an empty space on the chart where no trades took place.
Sometimes a stock closes at $50 and opens the next morning at $54, with no trading in between. On the chart that leaves a blank space — a gap. Gaps happen when news or orders arrive while the market is closed, and they matter for two reasons: they can mark the start, middle or end of strong moves, and they can jump straight over your stop-loss. This entry explains the main types of gap, the popular idea that “gaps always fill”, and how gaps affect risk.
- Category
- Price Action
- Reading time
- 6 min
- Also called
- Gap, Gap up, Gap down
- Updated
A price gap in plain words
A gap is a blank area on a chart where no shares traded within a price range, usually between one day’s close and the next day’s open.1 In an up gap, the new day’s low is above the previous day’s high; in a down gap, the new high is below the previous low.1
Gaps usually come from news outside trading hours — earnings, mergers, economic data — or from orders that build up overnight.2 They are common in stocks, which close every night, and rarer in markets that trade around the clock, such as crypto.
How to read a gap, step by step
Find the gap
Compare each candle’s range with the previous one. A full gap leaves space between the two ranges.
Check the context
Is the gap leaving a range, appearing mid-trend, or coming after a long move? The location suggests the type.
Classify it
Common, breakaway, runaway or exhaustion — each tends to behave differently afterwards.1
Watch whether it fills
A gap is filled when price comes back to the level before the gap.1 Some fill in days; others never do.
Plan for gap risk
Holding overnight means a gap can open beyond your stop. Size positions with that in mind. See Gap Risk.
Worked examples
Example 1 — Measuring a gap
BreakawayA stock’s high yesterday was $51.10. After strong earnings it opens at $52.60 and its low today is $52.40.
| Gap | $51.10 → $52.40 |
| Size | $1.30 (≈ 2.5%) |
| Volume | 3× average |
A full up gap on heavy volume out of a trading range is the classic breakaway gap — often the start of a new trend.1
Example 2 — A stop that gapped
Gap riskA trader holds 300 shares bought at $40 with a stop at $38. Overnight the company cuts its outlook; the stock opens at $34, and the stop fills at $33.90.
| Planned loss | 300 × $2 = $600 |
| Actual loss | 300 × $6.10 = $1,830 |
| Extra loss from the gap | $1,230 |
A stop cannot trade at prices the market skipped. Gaps are the main reason real losses exceed planned ones. See Stop Loss.
Example 3 — Waiting for a gap to fill
No fillA stock gaps up from $60 to $65 on a takeover offer of $70 a share. A trader shorts at $65, expecting the gap to fill back to $60.
| Price two months later | $68.50, as the deal approaches |
| Loss per share | −$3.50 |
Breakaway and runaway gaps may take a long time to fill, or never fill.1 “All gaps fill” is a saying, not a rule.
Three kinds of gap in one move
The four main gap types
| Aspect | Where it appears | Volume | Usually fills? |
|---|---|---|---|
| Common gap | Inside trading ranges1 | Low1 | Usually, quickly1 |
| Breakaway gap | Leaving a range; start of a trend1 | Strong1 | Often not for a long time1 |
| Runaway (measuring) gap | Middle of a strong trend1 | Clearly higher1 | Often not for a long time1 |
| Exhaustion gap | Near the end of a long move1 | High1 | Usually, quickly1 |
Why traders watch gaps
Spotting new trends
Breakaway gaps on heavy volume can mark the start of a move. See Breakout.
Spotting tired trends
A gap after a long run that quickly reverses can be the first sign the move is ending.1
Support and resistance
The edges of an unfilled gap often act as levels when price returns. See Support and Resistance.
Managing overnight risk
Knowing that gaps happen leads to smaller positions around earnings and news.
Advantages and disadvantages
Advantages
- Gaps are easy to see and measure.
- They often reflect important new information.
- Gap edges give clear reference levels.
Disadvantages
- The same-looking gap can be breakaway or exhaustion; you often know only later.
- Gaps can jump over stop-losses, causing larger losses than planned.
- “Gaps always fill” is unreliable as a trading rule.1
- In 24-hour markets, true gaps are rare, so the concept applies differently.
Going deeper
Read as far as you need. Each level builds on the one before it.
Not every gap matters
Beginner
Small common gaps happen all the time, including from ex-dividend dates, and usually mean little.1 Focus on large gaps with heavy volume at important levels.
Exhaustion or runaway?
Intermediate
Both appear after a strong move and both come with high volume. The difference shows afterwards: a runaway gap is followed by further progress, while an exhaustion gap is filled quickly as the trend reverses. Ignoring volume and follow-through makes them easy to confuse.1
Island reversals and futures gaps
Advanced
An island reversal forms when an exhaustion gap in one direction is followed shortly by a gap in the other direction, leaving a cluster of candles isolated on the chart.
Futures and CFDs on indices often trade almost around the clock, so the cash index can gap while the futures chart does not. Check which market and session your chart shows.
Common mistakes
Fading every gap
Betting that every gap will fill fights the strongest moves — breakaway and runaway gaps.
Ignoring volume
Volume is the main clue to whether a gap is significant.
Holding full size through earnings
Earnings are a frequent cause of large gaps; reduce size or accept the gap risk.
Treating the stop as a maximum loss
A gap can open beyond the stop. Size so that a gap would still be survivable.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A gap is a range of prices where no trading took place, usually between a close and the next open.
- Common, breakaway, runaway and exhaustion gaps behave differently.
- Volume and location are the main clues to a gap’s type.
- Many gaps fill, but breakaway and runaway gaps may not for a long time — if ever.
- Gaps can jump over stops, so they are a key part of overnight risk.
Frequently asked questions
Do all gaps get filled?
Why do stocks gap?
Can crypto gap?
Further learning
- Stop Loss
Why stops cannot protect you fully from gaps.
- Breakout
Breakaway gaps are a special kind of breakout.
- Volume
The main clue to a gap’s significance.
- Stop-Limit Order
How stop-limit orders behave when price gaps through them.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- StockCharts ChartSchool. Gaps and Gap Analysis (opens in a new tab) Checked .
- Investor.gov (SEC). Extended-Hours Trading: Investor Bulletin (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Gap Patterns (opens in a new tab)
- Investopedia: Gap (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.