What Is a Gap Up? (Day Trading Glossary)

A gap up happens when a stock opens higher than where it closed the day before. Because no trades happen between the old closing price and the new, higher opening price, the chart shows an empty space, or "gap," between the two days.

For a day trader, a gap up is often the first sign that a stock has news and could move fast at the open.

Why a stock gaps up

The stock market does not trade around the clock. Between the afternoon close and the next morning's open, orders pile up. When far more of them want to buy than sell, the stock opens well above its last close, and a gap appears.

The usual trigger is good news released after the close, most often a strong earnings report. Heavy pre-market buying can push the open up too, including short sellers scrambling to buy back shares and limit their losses.

What a gap up tells you

A gap up is generally read as bullish, since it shows buyers are eager to own the stock at a higher price than yesterday. The bigger the gap and the more news behind it, the more attention the stock tends to draw.

A gap up does not promise the stock keeps climbing. Some stocks open high and then fade as early buyers take profit, a move traders call a gap up and sell off. Prices can also drift back toward the prior close later in the day, which is known as "filling the gap."

How I trade gap ups

Gappers are the heart of my morning scan. Before the open, I build a watchlist of the stocks gapping up the most, then I throw out any that have no clear news behind them.

From what's left, I want the obvious one, a low float stock gapping up on a real catalyst with heavy relative volume behind it. That mix is what powers the biggest moves I trade. Most of the action comes in the first hour, so a clean gapper is where my attention goes at the open. A gap with no news and no volume is one I leave alone, because it usually goes nowhere. This filtering is the front end of my method.

Frequently asked questions

Is a gap up bullish or bearish?

Bullish, but not a guarantee. Buyers pushed the opening price above the previous close, yet plenty of gappers stall and reverse soon after the open. Treat it as a starting signal rather than a sure thing.

What happens when a stock gaps up?

The stock opens above its prior close, leaving a visible gap on the chart. From there it can keep running or fade back toward where it started. Which one happens depends on the news and how the broader market is trading that day.

What is the difference between a gap up and a gap down?

A gap up opens higher than the prior close, pushed there by overnight buying demand. A gap down is the opposite, opening lower after sellers dominate overnight.

This content is for educational purposes only and is not financial advice. Trading involves significant risk and may not be suitable for all traders.