3.14What is a gap-up opening?
1What is it?
A gap-up happens when a stock opens well above its previous close, leaving a "gap" on the chart where no trading happened.
2Why does it exist?
It happens after strong positive news overnight: great results, a big order, good global cues.
3Diagram
4Calculation
Gap % = (Open − Previous close) ÷ Previous close × 100
- Previous close ₹506, open ₹526
- (526 − 506) ÷ 506 × 100 ≈ 3.95%
A gap-up of about 4%.
5Risks
- Buying blindly at a gap-up can mean buying at the day’s high if early buyers take profit.
6Quick revision
- Gap-up = open far above previous close.
- Caused by overnight good news.
- Gaps can fill (price returns) later.
7Knowledge check
Q1. Previous close ₹200, open ₹210. Gap %?Show answer
5% gap-up.
Q2. What usually causes a gap-up?Show answer
Strong positive news before the open.
Q3. What does "gap fill" mean?Show answer
Price later returns to the previous close level, closing the gap.