Price Gaps and Trading Volume
A gap is when a share opens at a price well above or below where it closed. Volume is how many shares changed hands.
Why this matters for beginners
Gaps can jump straight past stop orders, and volume shows how much conviction sits behind a move. This is general education, not personal advice.
Main explanation
News released overnight, such as earnings, changes what investors are willing to pay before the market opens.
At the open, the price jumps to the new level. No trades happen at the prices in between.
A stop order set at 95 on a share closing at 100 can fill at 85 if it gaps down to 85.
A big move on high volume means many investors took part. A big move on low volume may be less reliable.
Example using a real company
Companies often gap 10 percent or more the morning after earnings, such as Meta did after several reports.
- →Close 100, overnight bad news, open 88: a 12 percent gap down.
- →Normal volume 1 million shares; 6 million on news day signals unusual interest.
Common beginner mistakes
- ✕Expecting a stop order to fill exactly at its level.
- ✕Ignoring volume when judging a price move.
Key terms
- Gap
- A jump between one session's close and the next open.
- Volume
- The number of shares traded in a period.
Key takeaways
- 01Gaps skip prices, so stops can fill worse than planned.
- 02Volume shows how many investors stand behind a move.
Check yourself
- 01What causes most price gaps?
- 02A stop at 95, close 100, open 85. Where might it fill?
- 03What does high volume on a big move suggest?
Try the concept on a real company
Check a company's next earnings date in the Analyzer and think about how a gap could affect you.
Educational examples only. Not buy or sell recommendations.