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Common gap

A small gap inside a trading range with no news behind it, carrying little information and usually filled quickly.

Common gaps appear in quiet, thinly traded conditions or simply because the overnight session drifted. They occur inside consolidation rather than at boundaries, and volume around them is unremarkable.

They are the gaps that make gap-fill statistics look good, because they close so reliably. They are also the least worth trading: small gaps mean small targets, and after costs the edge tends to disappear.

The useful discipline is classification before action. If a gap is small, newsless and inside a range, treat it as noise; if it is large, at a boundary and on volume, treat it as information. Applying one gap rule to every gap is how traders lose money on the tails.

Related: gap-fill, breakaway-gap, gap, consolidation, session-breaks

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

Educational only, not advice. Spotted an error? Post in Site Feedback.