In plain English
What Price gap means
On a daily chart, an upward gap can occur when the next day’s low is above the prior day’s high; a downward gap is the opposite. Gaps are most visible in markets with defined trading sessions, such as listed shares and futures. In continuously quoted markets such as spot forex, they are less common during active weekday trading but may appear after a weekend or a disruption in pricing.
Why it matters
A gap can signal a sharp repricing between chart periods, but it also creates execution risk. A stop-loss order is generally triggered when its level is reached; it does not ensure a fill at that level when prices jump over it. The difference between the requested trigger and the actual execution is slippage.
Example
A share closes with a daily high of $50.00. The next trading day opens at $52.00 and its low for the day is $51.70. The $50.00–$51.70 area contains no recorded trading on those daily bars, so it is an upward price gap. This example is simplified.
Quick answers
Common questions
Why are price gaps less common in spot forex?+
Spot forex is quoted across much of the weekday through a decentralized network rather than a single daily exchange session. Continuous quoting reduces ordinary session-opening gaps, although weekend reopening and abrupt liquidity changes can still create them.
Can a stop-loss order prevent gap risk?+
A stop-loss order can set a trigger for attempting to exit, but it usually does not guarantee the execution price. During a gap, the available execution price may be materially worse than the stop level.
Sources