A gap changes the relationship between today's opening and yesterday's trading range. It can signal new information, trapped positioning or temporary overnight imbalance, but the opening response decides which interpretation remains useful.
Classify where the market opens
Note whether price opens inside the prior range, outside it, or beyond a multi-session reference. The distance to the previous high, low and close helps define which levels may influence early behaviour.
- Inside-range gap
- Outside-range gap
- Breakaway context
- Nearby higher-timeframe zone
Observe acceptance and rejection
Sustained trade away from the prior range can support acceptance, while a quick move back through the opening and into old value can show rejection. Define the observation period before the session instead of changing it after the move.
Adjust for wider early volatility
Large gaps can create wider stops, faster option repricing and poor entries after the first move. Reducing quantity or waiting for structure may preserve the risk limit better than chasing.
Keep a balance scenario
Not every gap continues or fully fills. Price can rotate between new and old references, making no trade or smaller risk the appropriate response until structure improves.
Measure the opening location objectively
Calculate the gap from the previous close and locate the open relative to the prior range and larger structure. A small gap inside balance and a large gap beyond a multi-session extreme should not use the same expectations.
Mark the distance to the nearest prior reference and estimate the stop needed after confirmation. If most potential reward is already consumed at the open, the best continuation decision may be to wait.
- Gap size
- Prior-range location
- Nearest opposing level
- Required stop distance
Review gap behaviour by category
Keep separate records for accepted gaps, rejected gaps and balanced sessions. Over time, this shows which context and confirmation rules are useful for the instruments you actually follow.
Do not turn a tendency into certainty. Sample size, changing volatility and scheduled events affect outcomes, so each new session still needs its own invalidation and quantity decision.
- Gap category
- Opening-range response
- Time to confirmation
- Realised execution quality