Breakaway gap

A gap is a break in the price series where one period opens away from the previous period's close, leaving a band of prices at which nothing traded. A breakaway gap is the name given to one appearing at the point price leaves a range, a consolidation or the boundary of a pattern. The same tradition names three others by position: a common gap inside a range, a runaway or measuring gap partway through a move, and an exhaustion gap at the end of one.

Nothing in a gap's appearance identifies which of the four it is, so the classification comes from context and, in the equity tradition, from volume, a breakaway gap being expected to carry heavier turnover than the periods around it. Because that judgement can only be made from what follows, the label is applied in retrospect far more often than it is applied at the time, which is the honest limit of the scheme.

Gaps require a market that closes. Shares and index instruments gap at the open when news has accumulated overnight or across a weekend, while a currency market trading continuously through the week gaps mainly at the weekly reopen and around events severe enough to empty the book. The practical consequence has nothing to do with the classification: no instruction can be filled inside a gap, because no price existed there, so an order resting in that band executes at the first price available on the far side of it.