Understanding Price Gaps

A gap is a price range where nothing traded

A gap appears when a market opens meaningfully above or below its previous close, leaving a blank band on the chart. It is not a drawing artefact. It is a record of the fact that price moved through that range without any transactions occurring there, usually because the market was shut while new information arrived.

That is why gaps carry information. Every other price on the chart has participants behind it, people who bought or sold at that level and now hold a position with an opinion about it. A gap has none. Nobody has a position to defend inside it, which is part of why price often travels back through a gap quickly once it starts.

Gaps in forex look different

Forex trades around the clock from Sunday evening to Friday evening, so intraday gaps are rare on major pairs. The gap you will actually encounter is the weekend gap: Friday closes at one price, Sunday opens at another, because something happened while the market was closed. Elections, central bank announcements and geopolitical events over a weekend are the usual causes.

This has a direct practical consequence. A stop order does not protect you across a gap. If you are long at 1.0900 with a stop at 1.0860 and the market reopens at 1.0810, your stop becomes a market order at the first available price, which is roughly 1.0810. The loss is 90 pips, not the 40 you planned. This is not slippage in the usual sense, it is the absence of any price in between, and it is the specific reason position sizing has to assume your stop might be exceeded. The position size calculator sizes for the planned stop, so anything that takes you past it is unbudgeted loss.

Gaps do not always fill

Many do, and that is exactly where the common wisdom does real damage. "Gaps always fill" is repeated so often that people treat it as a rule and trade against a gap expecting price to return. Most weekend gaps in forex are small and do close within a session or two, which is enough to make the belief feel confirmed most of the time. The gaps that do not close are the ones tied to a genuine change in circumstances, and those are exactly the ones large enough to matter.

Put it in terms of outcomes. A strategy of fading gaps might close many small gaps for small gains and then meet one 200 pip gap that keeps going. The arithmetic of that pattern is unforgiving, and it is the same shape as any strategy that takes frequent small gains against occasional large losses. The risk management guide works through why that distribution ruins accounts even when most individual trades close as expected.