Runaway Gap – Trading the Middle Gap

What is a Runaway Gap?

A Runaway Gap (also called a Measuring Gap) is a price gap that appears in the middle of a strong trend, as price continues in the same direction. Unlike a Breakaway Gap that forms when price breaks out of a consolidation, the Runaway Gap typically sits in the middle of an impulsive wave, showing intense buying or selling momentum.

Key characteristics:

The gap is called "Measuring Gap" because it often splits the main wave: the distance from the swing low/high to the gap is similar to the distance from the gap to the final target.

The chart above shows a strong uptrend with a gap in the middle, followed by further advances.

How to Identify a Runaway Gap

To recognize a Runaway Gap, check the following:

How to Trade a Runaway Gap

Entry: When the gap forms and price continues in the direction of the trend, enter after confirmation that the gap is not being filled. Alternatively, wait for a minor pullback that stays above the gap (in an uptrend) and enter on continuation.

Stop loss: Place it just below the nearest swing low (for an uptrend) or above the nearest swing high (for a downtrend). A safer stop can be placed slightly beyond the gap.

Target: Use the measuring technique: measure the height from the start of the move (e.g., swing low) to the gap, then project it forward from the gap. The size of the prior move often equals the future move from the gap.

For example, if price rises from 100 to 110, and the gap occurs between 110–112, the projected target is 10 units beyond the gap, i.e., 120–122.

Management: Move your stop to breakeven once price reaches 1R to reduce risk.

Real-world Example

In cryptocurrency markets, strong ETF news rallies can create multiple runaway gaps. For instance, after breaking a consolidation range, Bitcoin may make a bullish gap in the middle of an uptrend and continues to rally for several sessions without filling the gap. Traders who identify this mid-trend gap can take advantage of fast momentum.

In forex, because the market trades 24/5, gaps often appear at the weekly open. A bullish gap in an uptrend shows that buyers are overwhelming sellers.

Common Mistakes