Gap Down
An opening price below the previous period's low, leaving an unfilled space on the chart.
Formula
Test: Current Open < Previous Low
Unit
%
In depth
A gap down is the event that makes stop-loss orders imprecise: the trigger is passed before the market opens, so the order becomes live at whatever the opening price is, not at the trigger. This is the single most important practical fact in this category, and it means a stop caps intention rather than loss. In India a large gap down can also open directly at the lower circuit, in which case no exit is available at any price that session. Position size, not stop placement, is the only control that survives this scenario.
Worked example
Previous low ₹494, open ₹440. A stop at ₹480 triggers and fills near ₹440, so the realised loss is ₹60 a share from a ₹500 entry rather than the ₹20 planned — three times the intended risk.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Gap Down” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.