What is a 'Runaway Gap'

A runaway gap is a type of gap on a price chart that occurs during strong bull or bear movements. It is characterized by a significant change in price in the direction of a trend. During a trend, a security’s price may show several runaway gaps which can help to reinforce the trend’s direction.


A runaway gap is one of several gaps that may occur during a trend. In general, gaps in a security’s price will occur when the price makes a significant movement in either a positive or negative direction from one trading time period to the next.


Gaps can be an important price signal for a technical trader as they signify a substantial change in price from one trading period to the next. Therefore, gaps will tend to provide micro-insights for observations over a very short period of time since they are formed from the combination of two consecutive candlestick patterns. Generally, a gap is characterized by a 5% increase from the previous closing high of a green candlestick to the new opening price of a consecutive green candlestick or a 5% decrease from the previous closing low of a red candlestick to a consecutive red candlestick opening price.

Traders can follow candlestick patterns in a wide range of increments ranging from minutes to hours or days. Therefore, gap signals or patterns can be more or less reliable based on the time increments in which they are formed.

Runaway Gap Formation

A runaway gap will typically occur in the midst of an up or down trend. A runaway gap is a gap of 5% or more that occurs in the direction of a trending price. It is characterized as a runaway gap because of the timing of its occurrence. It is also typically associated with high volume trading supporting the gap.

Runaway Gap

The image shows a gap in the middle of a large upward movement.

Trends and Runaway Gaps

Runaway gaps occur during a bullish or bearish market trend. These trends usually follow trading cycles that will include a breakaway gap, several runaway gaps and an exhaustion gap. All of these gaps follow the same 5% price change methodology however they are characterized by the timing of their occurrence.

A breakaway gap will typically occur to support the indication of a trend reversal. It may follow a peak resistance pattern or a trough support pattern. As a price begins to follow a bullish or bearish trend, the trend will typically include several runaway gaps. The runaway gaps are usually accompanied by high volumes of trading which support the market’s price sentiment in the direction of the trend. Runaway gaps can help to provide added conviction for a trading strategy that is seeking to profit from a trend’s price direction.

  1. Gapping

    Gapping is when a stock opens significantly above or below the ...
  2. Dynamic Gap

    Dynamic gap refers to a method of measuring the gap between a ...
  3. Interest Rate Gap

    An interest rate gap is the difference between the rates of liabilities ...
  4. Upside Tasuki Gap

    An Upside Tasuki gap is a candlestick formation that is commonly ...
  5. Negative Gap

    A negative gap is a situation where a bank's interest-sensitive ...
  6. Output Gap

    An output gap is an economic measure of the difference between ...
Related Articles
  1. Investing

    Gap Strategies To Try For Intraday Trades

    Many traders lack effective strategies to manage gaps, whether they pop up on open positions or mark the first play of the day. These strategies may help.
  2. Investing

    Should Investors Squeeze Into The Gap?

    The Gap is closing stores and conducting layoffs. Will investor panic lead to opportunity?
  3. Trading

    Valeant Stock: Gaps Suggest Potential Recovery

    Trading around gaps could show if the recovery party in Valeant stock is already over or just getting started.
  4. Investing

    Gap Plummets After Warning of Bleak First Quarter

    Shares of Gap (NYSE: GPS) fell nearly 12% on Tuesday after the apparel retailer warned that its first-quarter sales and earnings would broadly miss analyst estimates. Gap said it generated $3.44 ...
  5. Insights

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of bull and bear markets, the two types of market conditions.
  6. Insights

    Gap Releases Q2 Sales Results, Banana Republic Down Again (GPS)

    Gap Inc. has released its latest sales figures with Banana Republic remaining the worst performing Gap brand.
  7. Investing

    Gap Rejiggers Its Brick-and-Mortar Strategy

    Gap is banking on its healthier Old Navy brand over its Gap and Banana Republic brands.
  8. Investing

    Investors Overlooking 'Powerhouse' Old Navy: Jefferies

    Gap Inc.’s recent stock rally has much further to run as investors have yet to fully appreciate the exciting earnings potential of the clothing giant’s apparel chain Old Navy, according to analysts ...
  9. Investing

    A Gap in Gap's Announced Store Closings (GPS)

    A reduction of store count could be a bad sign for the clothing retailer.
  10. Investing

    Gap Launches a Baby Clothes Subscription Box

    If the customers won't come to your stores, try to find a way to get them to buy from you digitally. Better yet, see if you can find an audience for a subscription box that creates recurring ...
  1. Do Stop or Limit Orders Protect You Against Gaps?

    Regardless of the type of stock order you place, there's no surefire protection against gaps. Read Answer >>
  2. What is the difference between a buy limit and a stop order?

    Learn the difference between buy limit orders and stop orders, including stop loss orders, and understand the risks of the ... Read Answer >>
  3. How do you use put options to profit from a bear market?

    Learn how traders use put options in their trading strategies to remain profitable, even in a bear market. Everyday investors ... Read Answer >>
Hot Definitions
  1. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  2. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  3. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  4. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  5. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  6. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
Trading Center