Price gap
What is the jump between one bar's close and the next bar's open, and why does it matter for fills and stop orders?
In plain words
A price gap is the difference between where one bar closes and where the next bar opens. The same jump appears at any timeframe: between hourly bars, or when a week opens far from where the prior week ended.
Why it matters
A gap means some intended trades did not execute at the expected price, and stop orders can trigger at a far worse level than the trader planned. Gaps are more common when a market is volatile or lightly traded, so they affect both expected fills and the size a position can safely carry.
In a real week: ETH, week of 4 March 2024
ETH opened the week of 4 March 2024 (Mon) at 3487.8 and closed at 3878.47, a weekly return of 11.2%, with a range of 24.8% between 3200.0 and 3993.75. The open sat 8.99% above the week low and 14.51% below the week high. Realised volatility was 89.6% annualised, and the largest one-hour move was -6.52% at Tue 19:00 UTC, which the data places late in the UTC day (16:00-23:59), the same hour the week low printed.
A common mistake
Assuming a gap will close. A gap marks where the market did not trade at the previous close; nothing requires it to retrace, and waiting for a fill can leave a position exposed.