Gap

A gap occurs when a security's price opens significantly higher or lower than the previous close, creating a blank space on the chart. Gaps typically happen due to after-hours news, earnings announcements, or significant market events. There are four main types: common gaps (filled quickly), breakaway gaps (start of new trends), runaway gaps (middle of trends), and exhaustion gaps (end of trends). Gap trading strategies include gap-and-go (trading in the gap direction) and gap fill (betting the gap will close). Understanding gap types helps traders identify potential opportunities and market sentiment.