1, Price areas on a chart where no trading takes place. Gaps happen often in markets that trade only part of a day because price-moving events and announcements take place during times when markets are closed. Follow-up price action may cover them, or “fill the gap.”

2, Gaps form when there is no trading in a particular series of rates. In normal market conditions price changes occur with increment movements. When the market is taken by surprise either by a major world event, lack of liquidity, major economic announcement; a gap may appear as the market is attempting to correct its view of the exchange rate immediately.