Gap
A jump with no trading in between
What it is
A jump where a candle’s entire range sits above the previous candle’s high, or below its low, leaving a band of price where nothing traded. On stocks it usually happens overnight, on news or earnings. On a market that never closes it happens on a shock, or on a chart drawn from thin data.
What it may suggest
That something changed while the market could not react to it. The edges of the empty band often behave as levels afterwards, because they are the last prices anyone actually transacted at.
Where it fails
The phrase "gaps always fill" is the most repeated claim in this whole library and it is not something a chart can support — some fill within hours and some never fill, and nothing on the chart tells you in advance which kind you are looking at. A gap is also the fastest way to be stopped out at a worse price than you planned, because there was no trading in between to stop you at yours.
Also called gap up, gap down, price gap, gap fill.
More concepts
- Support and resistancePrices that have mattered before
- Trend structureHigher highs and higher lows, or the reverse
- Breakout and retestPrice clears a level, then comes back to it
- InvalidationThe price that proves you wrong
- Risk-to-rewardDistance to target versus distance to stop
- Position sizingHow much, given where the stop is
ChartPeak is an educational tool. It is not financial advice and does not make investment recommendations. Trading carries a risk of loss, and past performance does not indicate future results. Do your own research.
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