Gaps, and how they interact with range
A gap is price moving while nothing traded. It inflates range measures, breaks reference levels, and behaves very differently in futures than in stocks.
A gap is a difference between one bar's close and the next bar's open, leaving a band of prices where no transactions occurred. Most gaps happen across a session boundary, when the market was shut and information kept arriving.
Why they matter for range
Gaps are the reason true range exists. High minus low ignores them entirely, which means every naive range calculation understates movement on exactly the days when movement was largest.
They also distort the average afterwards. A single large gap lifts ATR for the whole lookback, so readings stay elevated for a while even if trading has returned to normal. If a reading looks unusually high with no obvious cause, check whether a gap sits inside the window.
Futures and equities gap differently
| Futures | Equities | |
|---|---|---|
| Trading hours | Close to continuous on most contracts | Long overnight closure |
| Gap frequency | Lower — news gets traded through | Higher — overnight news prices in at the open |
| Typical cause | Weekend breaks, session halts, limit moves | Earnings, guidance, overnight macro |
This is one of the concrete reasons futures and equities need separate treatment rather than one set of settings applied to both. A measure calibrated on an instrument that rarely gaps will behave differently on one that gaps weekly.
There is a subtlety on futures charts. A contract that trades nearly around the clock still shows a gap on a regular-hours-only chart, because the overnight session has been hidden rather than skipped. Whether you see a gap can depend on your chart settings rather than on the market.
The categories, and what they are worth
Gaps get sorted into common, breakaway, runaway, and exhaustion. The scheme is descriptive and — this is the part usually left out — it is applied after the fact. A gap is called exhaustion because the move ended afterwards. In real time it looks like any other gap.
Use the vocabulary for discussing what happened. Treating it as a real-time classification means labelling something by an outcome you do not yet have.
On gap fill
Price returning to close the gap is a well-known phenomenon and the frequency varies enormously by instrument, gap size, and market conditions. Any single percentage quoted without those qualifiers is close to meaningless.
Worth noting too that a gap filling eventually and a gap filling before it hurts you are different claims. The first is common. The second is what would matter, and it is not what the statistic measures.
What actually changes after a gap
The untraded band becomes a region with no transaction history — no volume, no prior turning points, none of the structure that builds levels. And the prior session's reference points sit at a distance from current price rather than around it, which changes what every level-based measure on your chart is describing.