Gap

AAA

DEFINITION of 'Gap'

A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release.

Gap

INVESTOPEDIA EXPLAINS 'Gap'

An example of two different gaps can be seen in the chart above. Notice how the stock closes the trading session before the first gap at $50 and opens the next trading day near $46 with no trading occurring between the two prices. Gaps are a regular occurrence in all financial markets. However, they are rarely seen in the forex market since it is highly liquid and trades 24 hours a day.

RELATED TERMS
  1. Upside Gap Two Crows

    A bearish market reversal signal in technical analysis. The upside ...
  2. Island Reversal

    An occurrence in technical analysis where a stock price will ...
  3. Runaway Gap

    A type of gap on a price chart that occurs during strong bull ...
  4. Forex - FX

    The market in which currencies are traded. The forex market is ...
  5. Exhaustion Gap

    A gap that occurs after the rapid rise in a stock's price begins ...
  6. Breakaway Gap

    A term used in technical analysis. A breakaway gap represents ...
Related Articles
  1. Trading Strategies

    How do I build a profitable strategy when spotting a Runaway Gap pattern?

    Understand the basics of the runaway gap and how to utilize this pattern to establish profitable trade strategies, including necessary confirmations before entry.
  2. Technical Indicators

    How are Shooting Star patterns interpret by analysts and traders?

    Learn what the shooting star candlestick formation is and the reasons traders and market analysts commonly interpret it as a bearish reversal signal.
  3. Trading Strategies

    Why do breakaway gaps happen on securities?

    Learn what it means when a security chart has a breakaway gap, what causes a breakaway and why traders consider them to be so important.
  4. Technical Indicators

    Why is the Bullish abandoned baby pattern important for traders?

    Discover how to identify the bullish abandoned baby pattern in Japanese candlestick charts, and learn why traders interpret it as a sign of reversal.
  5. Technical Indicators

    Why is the Bullish Belt Hold useful for traders?

    Discover one of the most common candlestick chart trading patterns, the bullish belt hold. Learn why this pattern is considered a bullish trend reversal.
  6. Charts & Patterns

    What are common trading strategies when identifying a Downside Tusuki Gap pattern?

    Read about the common trading techniques and most important price signals associated with the downside Tasuki gap candlestick pattern.
  7. Options & Futures

    Reducing Risk With Options

    If you want to use leverage to your advantage, you must know how many contracts to buy.
  8. Forex Education

    Playing The Gap

    Learn how you can earn money by analyzing the disruptions in normal price patterns.
  9. Options & Futures

    Do stop or limit orders protect you against gaps in a stock's price?

    Many individuals are hesitant to invest in the stock market because of the large gaps in prices talked about in the news. It is not totally uncommon to see a stock that closed the previous session ...
  10. Investing

    Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially affect a company's value and will not lead to the wide changes ...

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center