London, United Kingdom
+447351578251
info@traders.mba

Runaway Gap

Support Centre

Welcome to our Support Centre! Simply use the search box below to find the answers you need.

If you cannot find the answer, then Call, WhatsApp, or Email our support team.
We’re always happy to help!

Table of Contents

Runaway Gap

Understanding Runaway Gap

A Runaway Gap is a type of price gap that occurs during a strong trend, indicating continued momentum in the same direction. Unlike breakaway gaps, which signal the start of a new trend, or exhaustion gaps, which mark the end of a trend, a runaway gap happens mid-trend, reinforcing the existing price movement.

Traders use runaway gaps to confirm trend strength and identify potential entry points, as they often indicate increased buying or selling pressure.

How Runaway Gaps Work

A runaway gap forms when an asset’s price opens significantly higher (in an uptrend) or lower (in a downtrend) than the previous close, with no overlapping price action. The gap remains unfilled as strong momentum pushes prices further in the trend direction.

Example of a Runaway Gap

  • Bullish Runaway Gap: A stock trading at £50 closes, then gaps up to £55 on the next session, continuing to rise without retracing.
  • Bearish Runaway Gap: A currency pair trading at 1.2500 drops overnight and opens at 1.2400, continuing its downtrend without closing the gap.

Key Characteristics of Runaway Gaps

  • Occurs in the middle of a strong trend
  • High volume confirms strength
  • Does not fill quickly (Unlike common gaps that are usually closed)
  • Signals increased trader participation
  • False Signals – Some gaps may appear as runaway gaps but later fill, invalidating the trend continuation.
  • Low Liquidity Risks – In thinly traded markets, gaps can result from lack of liquidity rather than real momentum.
  • Overreliance on Gaps – Traders should confirm gaps with volume and trend strength indicators.

Step-by-Step Solutions for Trading Runaway Gaps

  1. Confirm the Trend – Ensure the market is already in a strong uptrend or downtrend.
  2. Check Trading Volume – High volume strengthens the validity of the runaway gap.
  3. Use Technical Indicators – Pair with moving averages, RSI, or MACD for additional confirmation.
  4. Set Stop Loss Properly – Place stops below the gap in an uptrend or above in a downtrend to manage risk.
  5. Monitor Price Action – If the gap starts filling, reassess the trade as the trend may weaken.

FAQs

What is a runaway gap in trading?

A runaway gap is a price gap that occurs mid-trend, confirming strong momentum and suggesting the trend will continue.

How is a runaway gap different from a breakaway gap?

A breakaway gap signals the start of a new trend, while a runaway gap occurs within an existing strong trend.

Does a runaway gap always remain unfilled?

Usually, but not always. If the gap fills quickly, it may indicate a weakening trend.

How do traders confirm a runaway gap?

By checking high trading volume and ensuring the market remains in a strong trend.

Can a runaway gap signal trend exhaustion?

No, an exhaustion gap appears near the end of a trend, while a runaway gap signals continuation.

Do runaway gaps happen in forex trading?

Yes, they can occur after major economic events or high-impact news releases.

What causes a runaway gap?

Increased trader participation, strong market sentiment, and institutional buying or selling.

Should traders enter a position immediately after a runaway gap?

It’s best to wait for confirmation, such as a strong follow-through candle and high volume.

How do runaway gaps impact stop-loss placement?

Traders place stops below the gap in an uptrend and above in a downtrend to manage risk.

Are runaway gaps common in stock markets?

Yes, they often occur in trending stocks with strong momentum, earnings releases, or major news.

Disclaimer: The content on this site is for informational and educational purposes only and does not constitute financial, investment, or legal advice. We disclaim all financial liability for reliance on this content. By using this site, you agree to these terms; if not, do not use it. Sach Capital Limited, trading as Traders MBA, is registered in England and Wales (No. 08869885). Trading CFDs is high-risk; 74%-89% of retail accounts lose money.