Trading term

What is Gap?

A gap is a jump on a price chart where a candle opens well above or below the previous candle's close, leaving an empty space with no trading in between. Gaps usually form on news released while the market was closed, and often act as support, resistance, or a target price will 'fill' later.

A gap appears when supply and demand shift so sharply between one session's close and the next's open that price leaps rather than moving continuously — earnings, an announcement, or overnight news floods in while the market is shut. On the chart it's a visible void: the new candle's range doesn't overlap the previous one's. Gaps up show a burst of buying; gaps down, a burst of selling.

Traders classify gaps by context. A 'breakaway' gap launches a new trend out of a base; a 'runaway' (or continuation) gap appears mid-trend as it accelerates; an 'exhaustion' gap marks a final, tiring lurch near the end of a move. There's also the common idea that gaps tend to 'fill' — price often returns later to trade through the empty space, because the gap zone becomes support or resistance. Not every gap fills, but the tendency makes gap edges levels worth watching.

A gap up
Gap up(no trading here)close $50.20open $56

After closing at $50.20, price opens the next session at $56 on overnight news — an empty gap where no trading occurred. The gap edge often becomes support later.

For example

A stock closes at $50, reports strong earnings overnight, and opens the next morning at $56 — a $6 gap up with no trading between $50 and $56. Weeks later, price drifts back to $56 and finds support there: the gap edge acting as a level.

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Why it matters to you

Gaps mark moments of genuine surprise — where new information reprices a stock instantly — so they flag where conviction (and risk) is highest. Knowing the gap types and the tendency to fill gives a trader both a read on a move's character and a set of natural levels for entries, targets and stops.

⚠ Not every gap fills

The 'gaps always fill' saying is a half-truth that traps traders into betting on a reversal back through every gap. Many do fill, but strong breakaway and runaway gaps can stay open for a very long time — fading a powerful gap just because it 'should' fill is how traders end up on the wrong side of a trend.

Frequently asked questions

What causes a price gap?

Gaps form when supply and demand shift sharply while the market is closed — most often from news like earnings, an announcement, or an overnight development. Buying or selling pressure builds up and the next session opens at a very different price, leaving an empty space on the chart.

Do gaps always get filled?

No. Price often returns to 'fill' a gap because the gap zone becomes support or resistance, but it's a tendency, not a rule. Strong breakaway and runaway gaps in powerful trends can stay unfilled for a long time. Betting that every gap must fill is a common mistake.

What are the types of gaps?

Common types: a breakaway gap launches a new trend out of a base; a runaway (continuation) gap appears mid-trend as it accelerates; an exhaustion gap comes near the end of a move as it tires; and a common gap occurs in quiet ranges with little significance.

Do gaps act as support or resistance?

Often, yes. The empty space left by a gap tends to act as a level: after a gap up, the gap zone can become support on a later pullback; after a gap down, resistance on a bounce. That's part of why traders watch gap edges as reference points.

Related terms

Ascending triangleAn ascending triangle is a bullish continuation pattern: a flat horizontal resistance line on top, with a rising trendline of higher lows beneath it. As the higher lows squeeze price against the ceiling, pressure builds — and it usually resolves with a breakout up through the resistance.ATR (Average True Range)ATR (Average True Range) measures how much a security typically moves in a period — its volatility — as an average of recent trading ranges. It doesn't say which direction price is heading, only how far it tends to travel, which makes it a core tool for stop-losses and position size.Bollinger BandsBollinger Bands wrap a price chart in three lines: a middle moving average with an upper and lower band set two standard deviations away. The bands widen when volatility rises and squeeze together when it falls, framing whether price is relatively high or low.BreakdownA breakdown is when price falls decisively through a support level it had been holding above — the bearish mirror of a breakout. It signals sellers have overwhelmed the buyers defending support, and often triggers a fast move lower as stops and new sellers pile in.
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