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Gap fill

Price trading back through a gap to the prior session's closing level, completing the range that was skipped.

A gap between one close and the next openSeven candles in a row; the fourth opens well above the third candle's close, leaving an empty shaded band that later candles never trade back into.31.6030.800.80GAP UPfrom close 30.80to open 31.60nothing tradedin the shaded bandEach candle is one session; the shaded band is the gap.
A gap between two sessions. A gap is a price range where no trading took place: the market shut at 30.80 and reopened at 31.60, so the shaded band in between holds no candles at all. It stays an open gap until price trades back through it.

When a market opens away from the previous close, the untraded band is a gap. Filling it means price later trades back across that band, usually measured as touching the prior close.

Gap fills are popular because the statistics sound impressive: in liquid equity indices a large share of small opening gaps fill the same day. The number is much less impressive once you separate gap size and cause. Small, newsless gaps fill often; large gaps on earnings or macro news fill rarely and can take months.

The dangerous version of this trade is fading a large gap on the assumption it must fill. There is no mechanism forcing a fill, and the losses on the ones that keep going are typically far larger than the gains on the ones that close.

Related: gap, common-gap, breakaway-gap, exhaustion-gap, gap-and-go

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