01/10/2026
📚 TRADING EDUCATION — PART 9
🧩 Price Gaps: Why Markets Sometimes Jump
Have you ever looked at a chart and noticed that price suddenly moved from one level to another with very little trading in between?
That can create a price gap.
A gap occurs when the opening price is significantly different from the previous closing price, leaving a visible space on the chart.
📈 Why can gaps happen?
Gaps can be caused by things such as:
Major company announcements
Earnings surprises
Economic data
Unexpected news
Market closures and reopening
Sudden changes in investor expectations
🏦 Stock-market example
A stock closes Friday at $50.
Over the weekend, major news is released.
On Monday, it opens at $57.
Instead of trading normally through every price between $50 and $57, the market opens substantially higher.
That's a gap up.
If it opens substantially lower, that's a gap down.
⚠️ Important misconception
You may hear traders say:
> “Every gap must eventually close.”
Don't treat that as a guaranteed rule.
Some gaps can remain open for a very long time, and some may never close.
🎯 What should a trader learn from gaps?
Don't automatically trade because you see a gap.
Instead, investigate:
What caused the gap?
How strong is the volume/activity?
Is there important news behind it?
How is price behaving after the gap?
🧠 KEY LESSON
> A gap is not a trade signal by itself. It's a piece of information about how the market repriced an asset.
🔥 TODAY'S TRADING QUOTE
> “Don't trade the chart before understanding the story behind the move.”
📊 TRADERS, WHAT WOULD YOU DO?
A stock closes at $100 and opens the next day at $110 because of unexpected news.
Would you:
A) Buy immediately
B) Wait for confirmation
C) Wait for a pullback
D) Stay out until the market settles
👇 Choose A, B, C, or D—and explain your reason.
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