Who it's for — Anyone trading stocks or indices with a stop who wakes up Monday to fills worse than expected. Gaps explain why stops don't always protect to the penny.
A gap forms when a candle's open is clearly away from the previous close: the chart shows a zone with no trades. Events while the market was closed (earnings, news, shocks) get absorbed at reopen with a price jump.
In simple terms — Friday closes at 100, Monday opens at 85: nothing traded between 100 and 85. A «hole» in the chart.
Gap up and gap down
| Type | Definition | Typical context |
|---|---|---|
| Gap up | Open > prior close | Positive overnight news |
| Gap down | Open < prior close | Negative shock, missed earnings |
If stop was at 95 but open is 70, the stop order may fill at the first available price (70), not 95 — common in markets that close overnight.
«Gaps get filled»
Many gaps are partially or fully «filled» (price returns to the empty zone, similar to a pullback), but it's not a law: gaps on strong trends can stay open for years.
| Market | Frequent gaps? |
|---|---|
| Stocks, indices (sessions) | Yes |
| 24/7 crypto spot | Rare (except crashes/illiquidity) |
| CME crypto futures | Yes (weekend close) |
Common mistake — Assuming stop loss guarantees exact price: with gaps, extreme slippage is possible.
Summary
- Cause: Information or orders accumulated off-session.
- Reading: OHLC candlestick (open vs prior close).
- Risk: Stops not filled at theoretical level.
Bronze path — End of module How price moves. Execution module: Market order. Index: Bronze path.