Unlike FX, stocks don’t trade around the clock during the working week. They usually trade throughout the
business day of the region they’re listed in. This is because there aren’t usually markets in other
countries offering the same stocks throughout the day as in the case of Forex (Asian/European/North American
sessions).
This means that there are long periods in each day, and also over the weekend, where no trading activity is
taking place. Now, even though the stock market may be closed, this doesn’t mean there’s no new information
coming out that will change investors’ beliefs or appetites for risk. These changes in outlook and sentiment
are the main reasons for market gaps.
A market gap will occur when the stock reopens for trading and the market is struggling to price-in the
developments that have taken place since the last time that market was live.
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