Price Gap

A price gap is an empty area on a chart where no trading occurred between two consecutive bars. It reflects a sudden shift in supply and demand.

Common types

• Common gap that fills quickly.
• Breakaway gap that starts a new trend.
• Runaway gap that continues a trend.
• Exhaustion gap near the end of a trend.

Example

A stock closes at 30 and opens at 33 after news. The gap between 30 and 33 is a price gap.

Practical notes

Gaps often attract attention as potential targets for fills or continuation. Context and volume help interpret their meaning.

Practical checklist

• Define the time horizon for Price Gap and the market context.
• Identify the data inputs you trust, such as price, volume, or schedule dates.
• Write a clear entry and exit rule before committing capital.
• Size the position so a single error does not damage the account.
• Document the result to improve repeatability.

Common pitfalls

• Treating Price Gap as a standalone signal instead of context.
• Ignoring liquidity, spreads, and execution friction.
• Using a rule on a different timeframe than it was designed for.
• Overfitting a small sample of past examples.
• Assuming the same behavior in abnormal volatility.

Data and measurement

Good analysis starts with consistent data. For Price Gap, confirm the data source, the time zone, and the sampling frequency. If the concept depends on settlement or schedule dates, align the calendar with the exchange rules. If it depends on price action, consider using adjusted data to handle corporate actions.

Risk management notes

Risk control is essential when applying Price Gap. Define the maximum loss per trade, the total exposure across related positions, and the conditions that invalidate the idea. A plan for fast exits is useful when markets move sharply.

Variations and related terms

Many traders use Price Gap alongside broader concepts such as trend analysis, volatility regimes, and liquidity conditions. Similar tools may exist with different names or slightly different definitions, so clear documentation prevents confusion.

Practical checklist

• Define the time horizon for Price Gap and the market context.
• Identify the data inputs you trust, such as price, volume, or schedule dates.
• Write a clear entry and exit rule before committing capital.
• Size the position so a single error does not damage the account.
• Document the result to improve repeatability.

Common pitfalls

• Treating Price Gap as a standalone signal instead of context.
• Ignoring liquidity, spreads, and execution friction.
• Using a rule on a different timeframe than it was designed for.
• Overfitting a small sample of past examples.
• Assuming the same behavior in abnormal volatility.

Data and measurement

Good analysis starts with consistent data. For Price Gap, confirm the data source, the time zone, and the sampling frequency. If the concept depends on settlement or schedule dates, align the calendar with the exchange rules. If it depends on price action, consider using adjusted data to handle corporate actions.

Risk management notes

Risk control is essential when applying Price Gap. Define the maximum loss per trade, the total exposure across related positions, and the conditions that invalidate the idea. A plan for fast exits is useful when markets move sharply.

Variations and related terms

Many traders use Price Gap alongside broader concepts such as trend analysis, volatility regimes, and liquidity conditions. Similar tools may exist with different names or slightly different definitions, so clear documentation prevents confusion.

Practical checklist

• Define the time horizon for Price Gap and the market context.
• Identify the data inputs you trust, such as price, volume, or schedule dates.
• Write a clear entry and exit rule before committing capital.
• Size the position so a single error does not damage the account.
• Document the result to improve repeatability.

Common pitfalls

• Treating Price Gap as a standalone signal instead of context.
• Ignoring liquidity, spreads, and execution friction.
• Using a rule on a different timeframe than it was designed for.
• Overfitting a small sample of past examples.
• Assuming the same behavior in abnormal volatility.

Data and measurement

Good analysis starts with consistent data. For Price Gap, confirm the data source, the time zone, and the sampling frequency. If the concept depends on settlement or schedule dates, align the calendar with the exchange rules. If it depends on price action, consider using adjusted data to handle corporate actions.

Risk management notes

Risk control is essential when applying Price Gap. Define the maximum loss per trade, the total exposure across related positions, and the conditions that invalidate the idea. A plan for fast exits is useful when markets move sharply.

Variations and related terms

Many traders use Price Gap alongside broader concepts such as trend analysis, volatility regimes, and liquidity conditions. Similar tools may exist with different names or slightly different definitions, so clear documentation prevents confusion.