What Is a Gap in Forex?

A price gap occurs when there is a sudden upward or downward movement in price without any trading activity in between. This results in a visible gap on the price chart.

Gaps can be triggered by several factors, including:

• Significant buying or selling pressure
• Economic or financial news
• Earnings reports
• Analyst outlook changes
• Major market announcements

Types of Forex Gaps

1. Common Gap – Occurs due to typical market forces and is frequently observed. It appears as a sudden jump or drop in price on the chart.
2. Breakaway Gap – Happens when a currency pair moves sharply with high trading volume, often signaling the start of a new trend.
3. Runaway Gap – Forms within strong bull or bear trends, caused by a sudden price surge or decline due to increasing market interest.
4. Exhaustion Gap – Appears after a rapid price rise, indicating weakened momentum and a potential decline in demand.

Gaps can present both risks and opportunities, making it important for traders to understand their causes and impact on price movements.