# Price Gaps and How to Trade Them > A gap is a jump between one candle's close and the next open. Learn common, breakaway, runaway and exhaustion gaps, gap fills and how to trade each type. Source: https://learn.tradelabsai.com/chart-patterns/price-gaps-and-how-to-trade-them/ Track: Chart Patterns · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Price Gaps and How to Trade Them", https://learn.tradelabsai.com/chart-patterns/price-gaps-and-how-to-trade-them/ A price gap is an empty space on a chart where no trading happened: the price jumps from one candle's close to the next candle's open without trading in between. Gaps are common on daily stock charts because news arrives while the market is closed. They show sudden shifts in supply and demand, and different types of gaps carry different meanings. ## Gap up and gap down - **Gap up:** the next candle opens above the previous candle's high. - **Gap down:** the next candle opens below the previous candle's low. Many traders also count partial gaps, where the open is beyond the previous close but within the previous range. ## The four classic gap types | Gap type | Where it appears | What it suggests | |---|---|---| | Common gap | Inside ranges, on ordinary days | Little meaning; often filled soon | | Breakaway gap | Out of a range or pattern, often on news, with high volume | Start of a new move | | Runaway (continuation) gap | In the middle of a strong trend | Trend accelerating; traders rushing in | | Exhaustion gap | Late in a long trend, often followed by reversal | Final burst before the move ends | The same size gap can mean very different things depending on where it occurs. Context and volume decide. ## Gap fills A gap is **filled** when price later trades back through the gap area to the previous close. A popular saying claims "gaps always get filled," but that is not true; breakaway and runaway gaps can stay open for a very long time. Common gaps fill most often. **Example: Two gaps, two outcomes** **Common gap:** a stock trading in a range between $40 and $43 opens at $42.60 after closing at $42.10 with no news. By midday it trades back to $42.10, filling the gap, and continues ranging. **Breakaway gap:** the same stock reports strong earnings and opens at $47.50, above the range top at $43, on five times average volume. It never returns to $43 that month. Traders who shorted expecting a gap fill took heavy losses. ## Trading gaps ### Gap and go On breakaway gaps with a clear catalyst and heavy volume, traders buy early strength, such as a break of the first 5 or 15 minute high, with a stop below the opening range or the gap's midpoint. See [Session, Weekly and Monthly Levels](https://learn.tradelabsai.com/price-action/session-levels/). ### Gap fill fade On common gaps without news, especially into resistance or support, traders fade the move towards the previous close, with a stop beyond the opening extreme. ### Waiting for the gap to hold Many swing traders wait a day or two to see whether a breakaway gap holds. If price stays above the gap, the old resistance often becomes support. See [Role Reversal and Retests](https://learn.tradelabsai.com/price-action/role-reversal-and-retests/). ### Exhaustion gap reversals After an extended move, a gap that is quickly reversed, closing back below the gap, can signal the end of the trend. Confirmation from the next candles is essential. ## Gaps and risk Gaps are the main reason stop orders sometimes fill far beyond their price. If a stock closes at $50 and opens at $44 after bad news, a stop at $48 fills near $44. Holding positions through earnings and major events exposes you to this. Size positions so a gap through your stop is survivable. See [Stop Orders](https://learn.tradelabsai.com/orders/stop-orders/) and [Earnings Trading](https://learn.tradelabsai.com/strategies/earnings-trading/). ## Gaps in different markets - **Stocks:** daily gaps are frequent around earnings and news. - **Futures:** trade nearly around the clock, so daily gaps are smaller, but weekend gaps occur. - **Forex:** weekend gaps at the Sunday open. - **Crypto:** trades continuously, so true gaps rarely appear on exchange charts, though CME Bitcoin futures charts show weekend gaps that some traders watch. - **Fair value gaps:** in smart money concepts, a gap between candle wicks within continuous trading is called a fair value gap. See [Fair Value Gaps](https://learn.tradelabsai.com/smart-money/fair-value-gaps/). ## Common mistakes - **Assuming every gap fills.** - **Fading breakaway gaps on big news.** - **Holding oversized positions through events** that can gap prices. ## Frequently asked questions ### What is a gap in trading? A jump in price between one candle's close and the next candle's open, leaving an empty space on the chart where no trades occurred. ### Do gaps always fill? No. Common gaps often fill, but breakaway and runaway gaps can remain open for long periods. ### Why do stocks gap up or down? Usually because of news, earnings or market events that occur while the market is closed, shifting supply and demand before the next open. Next, start the Indicators track with [Moving Averages Explained](https://learn.tradelabsai.com/indicators/moving-averages-explained/). ## Continue learning - Previous lesson: [Cup and Handle](https://learn.tradelabsai.com/chart-patterns/cup-and-handle/) - Related: [Cup and Handle](https://learn.tradelabsai.com/chart-patterns/cup-and-handle/): The cup and handle is a bullish pattern: a rounded base, a small pullback and a breakout. Learn the rules, the handle, buy points, stops and common failures. - Related: [Session, Weekly and Monthly Levels](https://learn.tradelabsai.com/price-action/session-levels/): Session levels like the opening range, previous close and weekly open guide intraday and swing traders. Learn the key levels, how to mark them and trade them. - Related: [Breakouts](https://learn.tradelabsai.com/price-action/breakouts/): A breakout is when price moves decisively beyond support, resistance or a pattern. Learn signs of a real breakout, entry methods, stops and how to avoid fakeouts. - Related: [Trading Sessions](https://learn.tradelabsai.com/markets/trading-sessions/): Markets have sessions with different liquidity and volatility. Learn stock market hours, extended hours, the forex sessions and how timing affects your trades. - Related: [Fair Value Gaps](https://learn.tradelabsai.com/smart-money/fair-value-gaps/): A fair value gap is a three candle imbalance where wicks do not overlap after a strong move. Learn how to spot FVGs, why price revisits them and how to trade them. - Related: [Earnings Trading](https://learn.tradelabsai.com/strategies/earnings-trading/): Earnings trading positions around quarterly company reports. Learn how expectations, guidance and implied moves drive reactions, and the main strategies. - Related: [Stop Orders](https://learn.tradelabsai.com/orders/stop-orders/): A stop order becomes a market order once a trigger price trades. Learn how stop losses and buy stops work, where to place them and why stops can slip.