Gap
Also called Price gap, Weekend gap, Opening gap, Market gap
A gap is a jump on a price chart where one candle opens well above or below the previous candle's close, so no trades happened in between. In forex, gaps mostly appear when trading restarts after the weekend or after sudden news.
Gaps matter because a stop loss is an order. It does not lock in a price. If price jumps past your stop, the order fills at the first price available, so a trade sized to lose $500 can lose much more.
Why forex gaps cluster at the weekly open
The currency market trades around the clock on weekdays, so an hourly chart rarely has holes. The weekend is the exception. Trading stops on Friday evening and restarts on Sunday evening, but news keeps coming in between.
When trading restarts, the first price reflects everything that happened over the weekend. If that price is far from Friday's close, the chart shows a weekend gap.
Smaller gaps can also appear mid-week. A major data release or a surprise decision can hit a thin market, and price skips levels for a few seconds. Exotic pairs trade less than the majors, so they gap more often.
How a gap jumps over your stop loss
Here is an illustrative example. On Friday you buy 1 standard lot (100,000 units) of EUR/USD at 1.1000. Your stop loss sits at 1.0950, 50 pips below. On a USD-quoted pair, one standard lot is worth $10 per pip, so you planned to risk $500.
The market closes Friday at 1.0980. Over the weekend bad news hits the euro, and Monday's first price is 1.0900. No trade printed at 1.0950 between Friday's close and Monday's open, so your stop becomes a market order and fills at 1.0900. In the chart below, your stop line sits inside the empty space.
Here is how the planned loss compares with the real one:
Look at the last candles. Price later climbed back above 1.0980 and closed the gap, but your stop had already filled at Monday's open, 1.0900. A later gap fill does not give back money you lost in the gap.
Checks before you hold a trade through a gap
- Will a weekend or a major scheduled release happen before you plan to close?
- Test your size against a gap twice your stop distance. Illustrative: if your stop is 50 pips away on 1 standard lot, test a 100-pip gap: 100 × $10 = $1,000. If that is more than you can lose, cut to 0.5 lots (100 × $5 = $500) or close before the weekend.
- Pending orders gap too. A buy stop or sell stop can fill worse than its level, while a limit order fills at its price or better.
- Spreads are often wider in the first minutes after the open. A wide spread alone can trigger a tight stop.
- Check whether your broker offers a fixed-price stop, a special stop order that fills at its exact level even through a gap. Brokers that offer one usually charge extra for it.
- Check whether your account has negative balance protection. Without it, a gap big enough to wipe out your account can leave you owing the broker money.
Four gap types and what each suggests
Chart analysts sort gaps by where they appear in a move. The names come from stock charts, where every session can open with a fresh gap. In forex you mostly see gaps at the weekly open, so use these labels as background, not as trade signals.
| Gap type | Where it appears | What it often suggests | How traders treat it |
|---|---|---|---|
| Common gap | Inside a sideways range | Little new information | Often expect price to return |
| Breakaway gap | Price leaves a range or jumps a key level | A new move may be starting | Avoid trading against it without a clear reason |
| Runaway gap | Midway through a strong trend | Pressure still in the trend direction | Some use it as an area to trail stops |
| Exhaustion gap | Late in a long, stretched trend | A last burst before the move tires | Watch for a quick fill and reversal |
You can only name the type afterwards. On the day they appear, a breakaway gap and an exhaustion gap look the same. The next few candles tell them apart. A common mistake is calling a gap "exhaustion" just because the trend is old.
Trading a gap fill: a decision rule
A gap fill means price travels back to the last price before the gap. For a weekend gap, that is Friday's close. Some traders try to trade that return by buying after a gap down or selling after a gap up.
Before you do, find out why the gap happened:
- If a real change caused it (a rate decision, an election result, a policy shock), do not assume a fill. The market has repriced, and the gap may turn out to be a breakaway gap.
- If you find no clear cause and the gap is small compared with the pair's normal daily range, a fill is more plausible. Wait until the first candles stop pushing the gap wider before you enter.
- Either way, place your stop beyond the post-gap extreme. Then size the trade so that a loss at that stop fits your risk.
Gaps do not "have to" fill. Some stay open for months.
Spotting gaps on your trading platform
Open an hourly or 4-hour chart and look at the first candle of each week. A gap shows up as a candle that opens away from the previous close, with blank space between them.
Two things can hide a gap. A line chart joins closing prices, so the empty space disappears. And price feeds differ: a separate charting website that uses another data source may show a different gap, or none at all. Your orders fill at your broker's prices, so judge gaps on your broker's chart.
FAQ
What is a CME gap?
Exchange-traded futures, including currency and crypto futures on the CME, stop trading for set periods. A CME gap is the difference between the last futures price before a pause and the first price after it. Traders in the related spot market watch whether price later returns to that level.
Why do some traders call a three-candle pattern a gap?
That is a fair value gap. One fast candle leaves space between the high of the candle before it and the low of the candle after it (or the reverse in a down move). Price did trade through that space, so nothing was skipped. A stop placed there fills normally, unlike a stop inside a real price gap.