What it looks like
The new candle's open is above the previous candle's high, leaving empty space on the chart between them. The gap is the space from the previous high up to the new candle's low. Gaps are most common at the weekly open on gold and forex and at the daily open on indices and shares.
What it means
Something changed while the market was closed or thin: news, earnings, a data release or a shift in mood. Buyers were willing to pay more at the open than anyone traded at before. If they keep paying and price stays above the gap, that new view is holding. If price falls back into the gap and fills it, the open was an overreaction.
How to trade it
- 1
Mark the top and bottom of the gap: the previous high and the new candle's low.
- 2
Confirmation: price holds above the gap through the first few candles.
- 3
Entry: buy while price is still above the gap, ideally on a small dip that holds above it.
- 4
Stop: below the previous candle's high, which is the point where the gap is filled. Example on US30: previous close and high at 46,900, open at 47,000. Buy a dip to 47,020 that holds, stop at 46,890, a 130 point risk.
- 5
Target: 2 times the stop or the next resistance level.
The gap is filled: price trades back down to the previous candle's high.
Where it works best
On markets that genuinely gap, such as US30 and NAS100 at the cash open or gold at the Sunday reopen, and when the gap follows real news.
WickSpeak spots gap ups automatically and names them on the candle that made them. The note explains what the gap is, how to trade it and that a filled gap proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Buying the open blindly without waiting to see whether the gap holds.
- Treating tiny gaps of a point or two as meaningful.
- Expecting gaps on markets that trade almost continuously, where they rarely appear.
Related patterns
Questions traders ask
Do all gaps get filled?
No. Many gaps are filled, but strong gaps after real news can run for days without coming back. That is why the trade only stands while price stays above the gap.
What causes a gap up?
A change while the market was closed or thin, such as overnight news, economic data or earnings. Buyers at the open are willing to pay more than the last traded price.
Does gold gap?
Gold trades almost around the clock during the week, so gaps mostly appear at the Sunday reopen after the weekend. Indices like US30 can also gap at the cash open, depending on your broker's data.
What proves a gap up wrong?
The gap being filled: price trading back down to the previous candle's high. At that point the reason for the gap has been undone.