Gap

What is a Gap?

A gap occurs when a stock's opening price is significantly different from the previous day's close, leaving a visible space on the chart. Gaps are caused by news, earnings, or overnight market activity.

Types of gaps

• Gap up: opens above previous close (bullish)
• Gap down: opens below previous close (bearish)
• Gap fill: when price returns to close the gap

Gap trading strategies

Gap and go: trade in the direction of the gap on high volume. Gap fade: trade against the gap, expecting it to fill. Most gaps eventually fill, but timing is everything.