Concept
Types of Gaps: Common, Breakaway, Runaway, Exhaustion
A gap is a discontinuity between one bar and the next — price opens away from the previous close with no trading in between. The conventional classification names four kinds by where they appear within a larger move.
How to read it
- A common gap appears within a quiet range and is usually unremarkable. Most gaps are of this kind.
- A breakaway gap is one that occurs as price leaves an extended quiet area, often on heavier volume.
- A runaway (or measuring) gap appears partway through a sustained move, and an exhaustion gap appears near its end. The names describe position within the move.
What "breakaway" actually requires you to know
An index trades between 21,900 and 22,100 for three weeks. It then opens at 22,340 — above the entire prior range, with no trading between 22,100 and 22,340. Over the next six weeks it moves to 24,000. Reviewed today, that opening is a breakaway gap. But notice the dependency: the classification needed the six weeks that followed. On the morning it occurred, an identical-looking gap that faded back into the range by Friday would have been a common gap instead. Same bar, different name, and the difference was supplied entirely by later data.
What it does not tell you
- Every one of these labels requires knowing how the move developed. A gap can only be called "exhaustion" once the move has ended, by which point the label has no practical use.
- The same gap is frequently reclassified as more data arrives — today’s runaway gap becomes last month’s exhaustion gap.
- "Gaps always fill" is repeated widely and is not a rule. Many fill, some take years, and some never do.
Frequently asked questions
What is a breakaway gap?
A gap that occurs as price moves out of an extended quiet area, frequently on higher volume. The label describes its position relative to a move that has already developed.
What is the difference between a runaway and an exhaustion gap?
A runaway gap appears partway through a sustained move; an exhaustion gap appears near its end. The distinction depends entirely on how much further price travelled, so it is assigned in hindsight.
Do all gaps get filled?
No. The claim that gaps always fill is a widely repeated simplification. Many are filled, some only after very long periods, and some are never filled.
Why do gaps happen?
Because orders accumulate while a market is closed. News, earnings or overnight movement in related markets can leave the first available price well away from the previous close.
Related
- Volatility: What It Measures and What It Does Not — Concept
- Consolidation and Ranges — Concept
- Support and Resistance — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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