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Gap Fill

Updated Jun 23, 2026 at 8:47pm

Research Draft Medium 905 words

A gap occurs when a stock opens at a price meaningfully away from the prior session's close, leaving an empty zone on the chart with no trades. The gap-fill setup is a mean-reversion trade built on the observation that price often retraces back toward the prior close to "fill" that empty zone — the opening imbalance that caused the gap proves temporary, and price drifts back to the gap-origin level. The setup is only an edge for some gaps; treating every gap as a fillable target is the classic way to lose money, because the gaps most likely to keep running are exactly the ones inexperienced traders fade.

The setup

The trade is to enter against the gap and toward the prior close, with the gap-fill level (the prior session's close, or the start of the gap) as the profit target.

Gap taxonomy (per StockCharts ChartSchool):

  • Common gap — small, low-volume, occurs inside a trading range with no real news. Tends to fill quickly, often the same day or within a few sessions. This is the gap-fill setup's bread and butter.
  • Breakaway gap — gaps out of a base/consolidation on heavy volume, marking the start of a new trend. Should not be expected to fill soon; the breakout level becomes new support/resistance.
  • Runaway (continuation) gap — occurs mid-trend on rising interest; like breakaway gaps, often does not fill while the trend persists.
  • Exhaustion gap — appears near a trend's end on very high volume; tends to fill quickly as the trend reverses (so an exhaustion gap down into a fill is the inverse-friendly case).

Trigger / entry: wait for the early move to stall and reverse back toward the gap (e.g., a reversal candle, loss of opening momentum, or VWAP rejection) rather than entering at the open. For a gap-up, you sell/short the fade toward the prior close; for a gap-down, you buy the bounce toward it. Stop: just beyond the day's extreme in the gap direction (above the high for a faded gap-up, below the low for a bought gap-down). Target: the gap-fill level (prior close). Many traders take partials before the exact fill, since the last fraction often stalls.

Which fill, which don't: low-volume, no-catalyst, in-range (common) gaps and exhaustion gaps tend to fill; high-volume, news/earnings-driven breakaway and runaway gaps frequently do not.

Base rates & evidence

Fill probability is conditional — it is not a single number. Any quote like "gaps fill X% of the time" is meaningless without specifying the gap type, size, instrument, and the window allowed for the fill.

What the literature consistently agrees on (direction, not precision):

  • Common / small / low-volume gaps fill at a high rate, often quickly. StockCharts ChartSchool states common gaps "usually get filled fairly quickly" and exhaustion gaps "are quickly filled as prices reverse." Aggregated backtest write-ups put short-term fill rates for small common gaps roughly in the high-50% to ~90% range depending on the size bucket and lookahead — but these figures come from blog/backtest sources of varying rigor, methods differ (same-day vs eventual fill), and they should be treated as indicative, not authoritative. Smaller gaps fill more often than larger ones.
  • Breakaway and runaway gaps fill far less often, and may not fill for weeks, months, or ever. StockCharts explicitly warns the "all gaps fill" assumption "might not always hold true, especially in the case of Breakaway and Runaway gaps," and that waiting for them to fill "can devastate your portfolio."

Caveat on the popular stats: many cited percentages (e.g., specific SPY same-day fill rates) trace to individual backtests with undisclosed or inconsistent sampling, survivorship, and fill-definition choices. Use them to rank gap types, not to set position size off a precise hit rate.

Strengths & limitations

Strengths: clearly defined target (the prior close), an intuitive risk point (the day's extreme), and a real behavioral basis for common gaps — opening order imbalances do tend to mean-revert.

Limitations and the #1 misuse: fading a breakaway or news/earnings gap expecting a fill. A gap driven by genuinely new information (earnings beat, guidance, M&A) reprices the stock; the "empty" zone may never be revisited, and a fader is stepping in front of a fresh trend with no defined edge. Other limitations: the exact fill often stalls just short, so the last leg is unreliable; gap size and volume must be screened (large, high-volume gaps behave like breakaways); and on the open, liquidity and slippage are worst exactly when you most want to act. Always condition the trade on why the gap happened.

System relevance

For Augustus, gap-fill should be a mean-reversion candidate gated hard by gap classification, not a default. Gates: (1) classify the gap — reject news/earnings/breakaway gaps and large high-volume gaps outright; (2) require a stall/reversal trigger rather than blind entry at the open; (3) set the target at the prior close and the stop beyond the day's extreme. Augustus should treat fill probability as conditional and assign lower confidence than the headline blog stats imply, sizing conservatively and flagging any catalyst-driven gap as ineligible.

Sources