What Is a Gap in Trading Charts?

A gap on a price chart occurs when the opening price of a new trading period (day, hour, etc.) is significantly higher or lower than the closing price of the previous period, leaving an empty space on the chart with no trading activity in between. Gaps appear as visible “jumps” or blank areas between candles or bars.

Gaps are common in markets with defined trading hours (stocks, futures) and rarer in 24-hour markets like forex (though they can still occur over weekends or low-liquidity periods). They reflect a sudden shift in supply and demand, often triggered by news or events outside regular trading hours.

This article is not financial advice and not a predictions of future price. Just a collection of information.

Types of Gaps

Gaps are classified by their position in the trend and what they typically signal.

Common Gaps (or Area Gaps)

Occur within a trading range or consolidation phase.
Usually small and quickly “filled” (price returns to the gap zone).
Often caused by low-volume news or routine events.
Least significant for long-term trend analysis.

Breakaway Gaps

Appear at the start of a new trend, breaking out of a consolidation pattern or key support/resistance.
Accompanied by high volume.
Rarely filled; signal strong momentum in the new direction.

Runaway Gaps (or Measuring Gaps)

Occur in the middle of an established trend.
Reflect accelerating momentum and enthusiasm.
High volume; often used to project further price targets (e.g., gap size added to breakout point).

Exhaustion Gaps

Appear near the end of a trend, after a prolonged move.
Often on very high volume initially, followed by reversal signs.
Frequently filled quickly as the trend runs out of steam.

Island Reversal Gaps

Rare; formed by an exhaustion gap followed by a breakaway gap in the opposite direction, leaving an “island” of prices isolated.

Where Gaps Are Most Visible

Stock Markets

Gaps are very common due to overnight news (earnings reports, mergers, macro data).
Example: A company beats earnings after hours → stock opens 10-20% higher the next day.

Futures and Commodities

Gaps occur between session closes/opens or on weekend news.
Crude oil or gold futures often gap on geopolitical events.

Forex Markets

True gaps are rare during the week due to 24/5 trading.
Weekend gaps common: Market closes Friday, opens Sunday evening with a jump due to weekend news.
Example: Geopolitical events or elections over weekends cause Sunday open gaps.

Cryptocurrencies

24/7 trading minimizes traditional gaps, but sharp moves can create visual “gaps” on lower timeframes or during low-liquidity periods.

Gap Filling: A Common Phenomenon

Many gaps (especially common and exhaustion types) get filled—price eventually returns to trade through the empty zone. Reasons:

Traders view the gap as “unfair” pricing and arbitrage it.
Profit-taking after strong moves.
Mean reversion tendencies.

Breakaway and runaway gaps are less likely to fill quickly, often remaining unfilled for long periods.

Why Gaps Matter in Trading Charts

Signal Sentiment Shifts: Large gaps indicate strong conviction (bullish or bearish).
Provide Reference Levels: Filled or unfilled gaps act as future support/resistance.
Highlight News Impact: Show how after-hours or weekend events affect opening sentiment.
Volume Context: Gaps with high volume are more significant than low-volume ones.

Gaps are a visual representation of imbalance between buyers and sellers when new information hits the market. They appear across timeframes and instruments, offering insight into momentum, exhaustion, or trend changes. While not predictive on their own, gaps are widely watched levels that reflect how markets process information outside regular trading hours.