A gap appears on a chart wherever price opens a session meaningfully away from where the previous one closed, leaving a blank space across which no trading took place. The emptiness can look like an error or an irrelevance, but it is in fact a meaningful record. A gap marks a moment when the balance of opinion shifted so abruptly that the market never paused at the intervening prices, jumping instead to a new level before trading resumed. Something happened between sessions — news, a change in sentiment, a sudden reassessment — significant enough that participants were unwilling to transact at the old prices at all. The void on the chart is the fingerprint of that abrupt revaluation.
Not all gaps carry the same meaning, and the most important distinction lies in where a gap occurs within the larger structure. A gap that propels price out of a long consolidation, breaking decisively beyond a range that has contained it, often signals the start of a significant new move. The abruptness reflects a genuine shift in the supply-demand balance, and such breakaway gaps frequently mark the beginning of a sustained trend, particularly when accompanied by heavy volume that confirms broad participation. A gap of this kind is the market declaring, with unusual force, that its assessment of value has changed and that the old range no longer applies.
A gap that occurs in the midst of an already-established trend tells a different story. When price has been advancing steadily and then gaps further in the same direction, the gap can represent a surge of conviction that carries the move into its next phase, a sign of strength rather than exhaustion. But a gap that appears after a long, extended run, especially one accompanied by unusually heavy volume, may signal the opposite. Such a gap can mark the final, frantic rush of participants chasing a move that is nearly complete, the point of maximum enthusiasm after which little buying power remains. Distinguishing a gap that continues a trend from one that exhausts it requires reading the context — how far the move has already travelled and how the market behaves in the sessions that follow.
There is a widespread belief that gaps must be filled, that price will eventually return to trade across the void it left behind. Like many tidy rules, this one holds often enough to be tempting and fails often enough to be dangerous. Some gaps are indeed filled quickly, as the initial reaction proves overdone and price drifts back; others remain open for a long time or are never filled at all, because the revaluation that created them was permanent. Treating the filling of a gap as a certainty, and positioning for it mechanically, ignores the more important question of why the gap occurred. A gap born of a genuine shift in fundamentals has little reason to be filled, while one born of a fleeting overreaction has every reason.
The value in reading gaps lies not in mechanical rules about filling but in understanding what an abrupt jump in price reveals about the market's state of mind. A gap is a moment of discontinuity, a place where gradual price discovery broke down and opinion changed all at once, and the meaning of that discontinuity depends entirely on its location and what surrounds it. Read in context — as a breakout, a continuation, or an exhaustion — the empty space on the chart becomes one of the more expressive features price action offers, a visible record of the moments when the market's collective judgement shifted too quickly to leave a continuous trail.