Price Gaps: Four Types and the Truth About "Filling"

A gap is empty space on a candlestick chart: today’s low is above yesterday’s high (gap up), or today’s high is below yesterday’s low (gap down). No trading occurred in between.

Where gaps come from

Information does not stop when the market closes. Earnings, policy decisions, overnight moves in other markets — all of it changes what people think an asset is worth while nobody can trade it.

At the open, price jumps straight to the new consensus, skipping the range in between. A gap is closed-session information hitting the price all at once.

That also explains why instruments trading nearly 24 hours — major FX pairs, for instance — rarely show daily gaps, while equities gap constantly.

The four types

The traditional classification depends entirely on where the gap appears:

• Common gap: inside a consolidation range, small, low information. These usually fill quickly.
• Breakaway gap: at the end of a base, price jumping out of the range on volume. The most meaningful type, often marking the start of a move (see breakout trading).
• Runaway gap: mid-trend, signalling acceleration. Sometimes used as a rough midpoint estimate for the move.
• Exhaustion gap: at the end of an extended move — the final push. These tend to fill quickly and often accompany a reversal.

Here is the catch: runaway and exhaustion gaps look identical at the time. Only hindsight separates them. Treat any claim of telling them apart in real time with suspicion.

”All gaps get filled”

This is the most repeated and most misunderstood line about gaps.

Statistically, most gaps do get filled eventually — small common gaps especially. But the claim hides two fatal ambiguities:

1. “Eventually” has no time limit. A gap might fill in three days or in three years. A prediction with no time bound has no operational value.
2. The ones that do not fill are the important ones. Genuine breakaway gaps frequently never look back — and those are precisely the largest moves.

So “fade every gap” trades a high frequency of small wins for a low frequency of very large losses.

A more useful view

Rather than predicting whether a gap fills, treat it as a location marker:

• Gap edges often act as later support or resistance.
• A gap up that is completely filled the same day (closing back below the gap) is usually a weak sign.
• Gaps mean much more read alongside volume: a breakaway gap on heavy volume and a common gap on light volume are not the same object.

A realistic expectation

A gap is a conspicuous chart feature, but its type is only knowable after the fact. The popular rules around gaps — “they always fill” above all — hold up far less well in practice than they sound. Nothing here is financial advice.

Practice it

Try the Gap Trading Practice drill to train recognition of where gaps sit and what type they resemble on real charts.