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Gap definition
A gap is a price area on a chart where an instrument opens well above or below its previous close, with little or no trading in between. It shows as a visible break in the price series rather than a continuous run of candles.
A gap forms when buy or sell orders build up while the market is closed or moves too fast to trade every price. It commonly follows earnings releases, economic data, or a weekend, and it appears across stocks, indices, commodities, forex, and CFD markets.
A gap that opens above the prior close is a gap up; one that opens below is a gap down. Price may later return to trade through the skipped area, which is called filling the gap, or it may hold and continue in the breakout direction. Gaps are most visible in markets with fixed trading hours, such as shares and indices, and far rarer in 24-hour forex outside the weekend open.
Gap Example
A stock CFD closes at USD 50 on Monday.
Overnight, the company reports stronger-than-expected earnings, and the stock opens at USD 55 on Tuesday.
The chart shows a gap up between USD 50 and USD 55, because no trades occurred between those prices.
USD 55 - USD 50 = USD 5
If price later falls back to USD 50, the gap has filled. If it holds above USD 55, the gap stays open.
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