Module 3 · Lesson 8 of 13 · Reading price · About 5 minutes
Price Gaps Explained: Opening, Breakaway and Exhaustion Gaps
On this page
Before you read: Trends, Trendlines and Channels: How Traders Draw Direction
What you will learn
- What a price gap is and why gaps appear more often on some charts than others.
- The common names for gaps: common, breakaway, runaway and exhaustion.
- What “filling a gap” means, and why gap statistics are easy to misread.
What is a gap?
If no trades happened between two prices, what does the chart show?
The usual definition compares two neighboring bars on the chart you are viewing: an up gap opens above the previous bar’s high, and a down gap opens below the previous bar’s low. A looser definition, often used for stocks, compares the open with the previous close. A stricter full-range gap also requires the whole new bar to stay outside the previous bar’s range; an opening gap that trades back into that range does not meet it. The chart window matters too: a gap on a regular-session-only chart may span prices that traded during excluded extended hours, so a chart gap is not proof that no trade happened anywhere in that price interval.
Compare like windows before comparing instruments. A stock chart omitting an overnight interval and a nearly continuous futures chart include different trading records. This can change which discontinuities are visible; it does not establish a universal ranking that stocks gap more often. A measured comparison would specify symbols, feeds, sessions, gap threshold, aggregation and sample. Actual closed-market price jumps and synthetic roll/adjustment jumps must also remain separate.
A gap can also appear on a chart when the data changes, not the market. A roll gap on a continuous futures chart and the jump that a stock split leaves on an unadjusted chart are examples. Neither was traded.
What are the common names for gaps?
Can the same gap look different depending on where it appears in a move?
Chart traders often use four labels, all assigned by looking at what happened around the gap:
- Common gap. A small gap inside a range that does not lead anywhere in particular.
- Breakaway gap. A gap out of a range or pattern, at the start of a new move.
- Runaway (or measuring) gap. A gap in the middle of an established move, in the same direction.
- Exhaustion gap. A gap late in a long move, followed fairly soon by a reversal.
Notice that you often cannot tell a runaway gap from an exhaustion gap until later. The label depends on what came after, which makes it a description and not a forecast.
Gap types diagram
Illustrative diagram constructed for teaching. Not real market data.
The diagram shows a fictional series of daily bars. A breakaway gap leaves a range, a runaway gap appears mid-move, and an exhaustion gap near the top is later filled. It is constructed for teaching and is not real market data.
Try it on a chart
- On this daily SPY chart, find a day that opened above the previous high or below the previous low.
- Check whether later bars traded back into that gap.
Charts and quotes are TradingView's data, not ours, and may be delayed.
What does it mean to fill a gap?
If price returns to where the gap began, what has happened, and what has not?
A gap is said to be filled when price later trades back through the empty space to the price where the gap began, which is the previous bar’s high for an up gap or its low for a down gap. Some traders also track a partial fill.
You may read claims that most gaps fill. Be careful with any such statistic:
- It depends on the definition of a gap, the market, the period studied and how long price is allowed to take.
- Given enough time, many prices are revisited, so “eventually filled” can describe almost anything.
- A claim that does not state its method, sample and time limit cannot be checked.
How do gaps connect to other lessons?
Where else have you met the idea of a gap at the open?
The opening types lesson describes how a session can open outside the prior day’s range and what traders watch in the first part of the session. Reference levels such as the prior close and prior day’s high and low are the prices a gap is measured against.
When noting a gap, record both its price reference (prior close versus prior high/low) and included session. Missing displayed bars, excluded extended hours and a truly untraded price interval are not interchangeable claims. The same underlying record can yield different apparent gaps under different session filters.
What this does not tell you about gaps
- A gap label is assigned with hindsight. It does not tell you what the next bar will do.
- Gap statistics vary widely with definitions and samples; none here is offered, and none is implied.
- Gaps can mean large price jumps past a stop order, which is one source of slippage.
- Nothing here suggests trading a gap or its fill.
Method in Practice: gap-and-go or gap-fill: two written plans
Fictional example. John, Harbor Index futures, the prices, times, costs and results are all invented for teaching. This shows how a written plan can be built and tested. It is not a recommendation, and nothing here says how often this idea works.
Try it on a real chart. Look at the chart in this lesson, then test this idea yourself on past sessions with bar replay. Keep your own count, including the days with no trade.
The idea. A gap's label (breakaway, exhaustion and so on) is given with hindsight (this lesson). John doesn't predict the label. He has two written plans, and the open's location decides which one is active. If neither fits, there's no trade.
John's two plans
- Gap-and-go (open above the prior high): buy if the first 30-minute period closes above the open. Wrong if a period closes below the prior high
- Gap-fill (open inside the prior range, above the prior close): sell if the first period closes below the open. Wrong if a period closes above the first period's high
- Neither if the gap is more than 1.5 points from the prior close
- Risk: $150 maximum, costs included
Three outcomes
-
Gap-and-go worked → +$140
-
Gap-fill failed → −$90, inside the limit
-
Gap too big: 1.8 points, neither plan → $0
Show the full replays
Replay A: gap-and-go (prior high 100.80, prior close 100.50)
| Time (CT) | What happened | John |
|---|---|---|
| 08:30 | Opens 101.30, above the prior high | Gap-and-go plan active |
| 08:30–09:00 | Closes 101.48, above the open | Buys 2 at market, filled 101.53 |
| 09:00–10:40 | Trades 102.03 (+0.50) | Sells 1 (limit). Exit for the other moves to 101.53 |
| 10:40–12:30 | Trades 102.53 (+1.00) | Sells the last 1 (limit) |
Result after costs: +0.50 point = +$50, +1.00 point = +$100, commissions −$10. Net +$140.
Replay B: gap-fill (prior high 100.90, prior close 100.30)
| Time (CT) | What happened | John |
|---|---|---|
| 08:30 | Opens 100.70, inside the prior range | Gap-fill plan active |
| 08:30–09:00 | High 100.82, closes 100.62 | Sells 2 at market, filled 100.57 |
| 09:00–09:30 | Closes 100.92, above 100.82 | Wrong-if met: buys back 2 at market, filled 100.97 |
Result after costs: 2 × −0.40 point = −$80, commissions −$10. Net −$90.
Replay C: gap too big (prior close 100.50)
| Time (CT) | What happened | John |
|---|---|---|
| 08:30 | Opens 102.30, 1.80 above the prior close | Neither plan: no trade |
| 08:30–15:00 | Swings 101.40–102.80 | Watches only |
Result: $0.
Test it yourself
- Write the definitions of "above the prior high" and "inside the range", including which session times they use.
- Replay every gap, and split the results by plan.
- Count the gaps both plans skipped.
Where it breaks
- Gap statistics vary with definitions and samples. None are given here.
- Gaps can jump past stop orders (Overnight and Gap Risk: When Prices Jump Past a Stop).
- Futures gap less often than stocks, depending on the session you count.
Calculators: position sizerisk/rewardexpectancy
Reflection question: Does your plan say what you do with a gap your rules don't cover?
Check yourself
- What separates an up gap from an ordinary higher open, using the bar definition? Hint: compare with the previous bar’s high.
- Why can a regular-session-only chart show a gap while a chart including overnight trades shows intervening prices?
- Why is “most gaps fill” hard to check? Hint: definition, sample and time limit.
Reflect on your own process
- Which gap definition does your journal use, prior high and low or prior close, and is it written down?
- When you log a gap, do you record which session setting and adjustment setting the chart used?
- If you read that most gaps fill, which method, sample and time limit would you check for first?
- Does your plan say what you do with a gap your rules don't cover?