Chartered Market Technician Practice Exam 2026 – Complete Prep Guide

A defining feature of a market gap is that it reflects a rapid change in market sentiment. Gaps occur when there is a substantial difference between the closing price of one trading session and the opening price of the next session, indicating significant market movement. This can stem from various factors, such as news releases, economic reports, or other events that shift traders' perceptions and expectations about a stock or the market.

The nature of a gap highlights how quickly traders react to new information, resulting in a jump in prices either upward or downward. It encapsulates the essence of trader psychology, where a major shift in sentiment can leave the market with no transactions at certain price levels, thus creating a gap.

While gaps can occur during earnings announcements, they are not restricted to these events; they can arise due to any significant news or development that influences investors' views. Gaps do not always indicate a market reversal; they can signify a continuation of the existing trend as well, depending on the context. Lastly, gaps are less common during regular trading hours, as they are usually a result of events that happen outside of those times, like after-hours trading or overnight news.