Overview
A gap is empty space on the chart where price opens away from the prior close — no trading happened in between. Gaps mark a sudden shift in supply and demand, usually from news, earnings, or an overnight move, and they're among the most actionable events of the day.
The key is telling the four kinds apart, because they mean very different things.
The four types of gap
- COMMONCommon gap — small, in a range, usually filled quickly. Little signal.
- BREAKAWAYBreakaway gap — gaps out of a base/pattern on volume; often the start of a real move and may not fill soon.
- RUNAWAYRunaway (measuring) gap — appears mid-trend as it accelerates; roughly marks the move's midpoint.
- EXHAUSTIONExhaustion gap — a final gap at the end of a move on climactic volume; often filled fast as the trend reverses.
Trading the gap
Two opposite playbooks exist. Gap-and-Go trades with a strong, high-volume gap as it breaks the opening range. Gap-fade bets a weak gap will close back toward the prior close. The deciding factors are the catalyst, the relative volume, and whether price holds or rejects the gap.
Why gaps fill (or don't)
A gap with no real new information often fills because the prior balance still holds — buyers and sellers drift back to the old fair value. A gap on a genuine catalyst (earnings, guidance) resets fair value, so it may never look back. "Gaps always fill" is a myth; some gaps fill, and the type tells you the odds.
Honest assessment
Gap-and-Go works when…
- A breakaway/news gap on high relative volume.
- Price holds above the gap and breaks the opening range.
- The gap aligns with the trend.
Gap-fade works when…
- A common gap with no real catalyst.
- An exhaustion gap on climactic volume.
- Price fails back into the prior range.
There's no universal "gaps fill" edge — outcomes depend heavily on gap type, catalyst, and volume. Trade the context, not the folklore.
Practice
Which gap tends NOT to fill quickly?
A breakaway gap — a high-volume gap out of a base often launches a sustained move and leaves the gap unfilled for a long time.
What does "the gap fills" mean?
Price trades back to the prior session's close, closing the empty space the gap created. Many common gaps fill; strong breakaway gaps often don't, at least not soon.
An exhaustion gap appears after a long run on huge volume. What does it warn?
Possible trend exhaustion — a final, climactic push that frequently fills fast as the move reverses.
This concept in the knowledge graph
Resources
- STRATEGYThe Gap-and-Go playbook.
- CONCEPTVolume & relative volume — the gap's fuel.
References
- Types of gaps & gap trading — Investopedia.
- Gap analysis — StockCharts.