Definition
A gap is a break in the continuity of a price chart. It occurs when a trading period opens at a price noticeably higher or lower than the previous period's close, so that no trades took place across the intervening range. On a chart, this leaves a visible empty space between the two periods' price bars.
Gaps usually form because significant news or a shift in sentiment arrives while the market is closed. By the next session, buyers and sellers have already repriced the asset, and trading resumes at the new level. The size and context of a gap give analysts clues about the strength of the move behind it.
Why it matters
How it works
Technical analysts read gaps according to where they appear in a trend. A breakaway gap occurs as price breaks out of a consolidation, signaling the start of a strong move. A runaway, or measuring, gap appears partway through a trend and suggests the move has further to go. An exhaustion gap forms near the end of a trend, often marking a final burst before a reversal.
A common observation is that gaps tend to be "filled" — price often returns later to trade through the empty space, especially for ordinary gaps. Breakaway gaps, by contrast, frequently stay open, which is why an unfilled gap can itself be treated as a sign of strength. Volume accompanying the gap helps distinguish the types.