Gaps
A bar that opens away from the prior close, leaving a space where nothing traded. The cause matters more than the shape, and most of them have a cause on record.
MadStockAlerts Research · Updated August 28, 2026
What to take away
- A price gap is an untraded space between one period's close and the next one's open.
- The cause is usually a scheduled or unscheduled disclosure overnight.
- Gap fill is a description of what sometimes happens, not a rule.
- Some apparent gaps are corporate actions and are removed by adjusted prices.
- No order type protects against an overnight gap; only position size does.
- Three of the four gap types can only be classified after the outcome, which is why the taxonomy has no forecasting content.
MAD Academy Training Video · 0:45
Not All Gaps Are the Same Event
A gap is a price range where nothing traded, and where it appears in a move tells you far more than the gap itself.
This lesson is part of a Stock Alerts + Tools plan.
Why they exist
US equities trade continuously for six and a half hours and then stop. Information does not. When a company reports after the close, the market's assessment changes while no trading is occurring, and the next session opens at whatever price the auction clears.
A gap is therefore not a move at all in the ordinary sense. It is the absence of trading across a range of prices, which is why it looks like a discontinuity: nobody transacted there because there was no market open in which to do it.
The causes, in order of frequency
| Cause | Where it is on record |
|---|---|
| Earnings | Press release and an 8-K, on a scheduled date |
| Material corporate event | An 8-K, usually filed promptly |
| Offering or pricing | A 424B prospectus supplement |
| Analyst or index changes | Third-party announcements before the open |
| Sector or macro news | Whole groups gapping together |
| Corporate action | Not a real gap at all; see below |
The first three are all findable in a filing within minutes. A gap with no visible cause is worth treating with suspicion rather than curiosity: it usually means the cause has not been found yet.
Gap fill
A gap fills when price later trades back through the untraded space. It is often described as though gaps must fill, and they do not. A gap on genuine new information frequently never fills, because the information permanently changed what the business is worth.
The distinction that matters is whether anything changed. A gap on no news, in a thin market, is a liquidity event and reverses often. A gap on a materially different set of facts is a repricing, and waiting for it to fill is waiting for the market to forget the facts.
There is also a survivorship effect in how the rule is remembered. Gaps that filled are easy to point at afterwards; gaps that never filled stopped being discussed, because a stock that gapped up forty percent on a takeover and never looked back does not generate commentary about its unfilled gap.
Gaps that are not gaps
A stock split, a large dividend or a spin-off produces a step in an unadjusted price series that looks exactly like a gap and is not one. Properly adjusted prices remove them.
A chart showing a mysterious fifty percent overnight decline with no news is usually showing an unadjusted split, and checking the corporate action record resolves it in seconds. This is worth checking before building any theory about the chart.
The taxonomy, and how much of it is retrospective
Gaps are conventionally classified into four types, and it is worth being clear that three of the four can only be identified after the fact.
| Type | Description | Identifiable when |
|---|---|---|
| Common | Inside a range, on no particular news | At the time, roughly |
| Breakaway | Out of a base, starting a move | Only once the move has happened |
| Continuation | Mid-move, sometimes called a measuring gap | Only once the move has continued |
| Exhaustion | At the end of a move | Only once the move has ended |
A gap out of a base that continues is called a breakaway gap; the identical gap that fails is called a common gap or a false break. The classification is applied by the outcome, which means it has no forecasting content whatsoever, however confidently it is used.
What is observable at the time is the cause, the size relative to the security's usual range, and the volume. Those are facts available on the day, and they are the ones a description made in advance can rest on.
Gap fill, and what the statistic means
It is frequently stated that most gaps fill, meaning price eventually trades back through the empty range. The claim is broadly true and considerably less useful than it sounds, because of what eventually is doing in the sentence.
Given no time limit, most gaps do fill, and so does most of any price range a security has traded through. A security that oscillates will revisit nearly every price it has visited, and a statistic with no horizon attached is close to a statement that prices move.
| Question | The honest answer |
|---|---|
| Do most gaps fill? | Over a long enough horizon, yes |
| Do most fill within a week? | Far fewer, and it depends heavily on the cause |
| Do earnings gaps fill quickly? | Least often of any category. A repricing is not a dislocation |
| Is a gap fill tradeable? | Only with a horizon and a failure condition attached |
The third row is the practical distinction. A gap caused by new information about the company's value is a repricing, and there is no particular reason for it to reverse. A gap caused by a temporary imbalance is a different case, and the cause is usually knowable on the day.