Price Gaps and Opening Auctions
A price gap occurs when the next observed trading range opens away from the preceding period’s range or close, depending on the stated definition. Opening auctions aggregate orders to determine a venue’s opening price.
How it works
Distinguish a close-to-open return from a full price gap with no overlap between adjacent ranges. The auction price depends on the venue’s matching rules, eligible orders and available liquidity. Indicative imbalance information can change before execution; it is not a guaranteed final print.
Worked example
A stock closes at 100 and opens at 108 after earnings. The close-to-open move is 8%. A sell stop at 98 does not imply an execution at 98: if no eligible trades occur near that price, the next available execution may be much worse. A separate session with an opening print of 102 could still overlap the prior day’s 99–103 range.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
Some apparent gaps result from stock splits, dividends or missing data. Auctions vary by market and may be delayed or halted. Never assume a gap must fill within a particular time or that premarket quotes represent executable size.
Knowledge check
Is every higher opening price a non-overlapping gap?
Read the explanation
No. Opening above the previous close can still occur inside the previous session’s range. Define the comparison before classifying examples.
References and further reading
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.