Gaps occur when price opens above the prior close (gap up) or below it (gap down), leaving a void. Four types: Common (noise, often fills), Breakaway (starts a new move), Runaway (continuation), Exhaustion (end of move).
The second bar’s high is 104; the third bar’s low is 106. The whole third bar trades above the second, leaving a gap of 2 points (about 1.9%). Two bars later the low reaches 103.5, below 104: the gap is filled.
The example data
The bars the example is worked on.
| Bar | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | 101 | 102 | 100.5 | 101.5 |
| 2 | 101.5 | 104 | 101 | 103.8 |
| 3 | 106.2 | 108 | 106 | 107.5 |
| 4 | 107.5 | 108.5 | 105.5 | 106 |
| 5 | 106 | 106.5 | 103.5 | 104 |
- Not every gap means the same: gaps inside a range tend to fill, while gaps on news can run. Telling them apart in advance is the hard part.
- “Gaps always fill” is a saying, not a statistic; some never do.
- On round-the-clock markets gaps barely exist, so the idea is mostly about stocks and futures.
gap_up = df['low'] > df['high'].shift() # the whole bar above yesterday's size = df['low'] - df['high'].shift() day = gap_up.idxmax() bottom = df['high'].iloc[day - 1] # the gap's lower edge filled = (df['low'].iloc[day + 1:] <= bottom).any()
Assumes import numpy as np, import pandas as pd, and a DataFrame df with columns open, high, low and close for the data above.
- Technical Analysis of Stock Trends, R. D. Edwards & J. Magee, 1948 (later editions revised by W. H. C. Bassetti)
- Technical Analysis of the Financial Markets, J. J. Murphy, New York Institute of Finance, 1999
Last reviewed October 2026 · How this site checks its content · Report a mistake
1. A gap at the start of a new trend, on heavy volume after news, is classically called a…
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B. Runaway gaps appear mid-trend; exhaustion gaps near its end. The labels are only certain in hindsight.
2. What about the saying “gaps always fill”?
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A. A rule that is right only on an unknown timescale cannot guide a trade.
3. Why are price gaps common in stocks but rare in major currency pairs?
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A. A gap is simply news priced in at the next open.