What Is a Price Gap: Why Price "Jumps" and Should You Trade the Fill?
A gap is an empty space on the chart when price opens much higher/lower than the prior session. We explain the types of gaps, the "gap fill" phenomenon, and how traders use them.
When price "jumps" a step, leaving an empty space
Sometimes you see a gap on the chart — price opening much higher (or lower) than the prior session close, creating a "hole" on the graph. Gaps usually appear due to news, earnings, or strong moves outside trading hours. Understanding the types of gaps helps you correctly read market psychology at that moment.
Why gaps form
A gap forms when there is a strong supply-demand imbalance between two sessions — usually because information appears while the market is closed:
- Surprise good/bad news, earnings reports.
- For Vietnamese stocks, a gap shows up as a difference between the reference price and the opening price; for crypto trading 24/7, gaps are rarer but still happen around major events.
The types of gaps
- Breakaway gap: appears when price escapes a consolidation/pattern, starting a new trend — usually on large volume, rarely filled soon.
- Runaway gap: appears in the middle of a strong trend, confirming the trend is accelerating.
- Exhaustion gap: appears at the end of a long trend, signaling the trend is running out — usually filled quickly.
- Common gap: in a ranging area, with little meaning, usually filled.
Volume and trend context help distinguish which gap is "reliable."
The "gap fill" phenomenon
A common observation: price often tends to return to "fill" the gap — that is, return to the price zone it jumped over. The reason: a gap leaves an "untraded" zone where there may be pending orders and a pull to return.
However:
- Not every gap gets filled, and there is no certain timeframe (it could be days, months, or never).
- A strong breakaway gap usually is not filled soon — betting on a "sure gap fill" is risky.
How traders use gaps
- Gap-and-go: trade in the direction of a breakaway gap on large volume, expecting the trend to continue.
- Gap-fill trading: bet that price returns to fill a common/exhaustion gap — riskier, needs confirmation.
- Mind the risk: a gap reflects strong volatility, slippage, and high risk — always apply risk management and set a stop-loss.
Conclusion
A gap is an empty space on the chart when price opens much higher/lower than the prior session, due to a strong supply-demand imbalance from news or events. There are several gap types (breakaway, runaway, exhaustion, common) with different meanings. Price often tends to fill the gap, but not always — read gaps with volume and context, and do not bet on certainty.
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