A gap is defined as an unfilled space or interval. On a technical analysis chart, a gap represents an area where no trading has taken place.
Mostly traders are talking about a gap between yesterday's cash/RTH
close price and today's open/RTH price. As such Fill the Gap generally is only relevant to instruments that have an underlying Cash market that is open for limited hours during the day vs. the futures instrument which is open for trading for nearly 24 hours a day.
The best example is the US stock exchanges (NYSE
etc) which typically open for trades
from 9.30am US ET to 4.00pm US ET, whereas the underlying futures instruments (ES, NQ, YM, TF etc) are basically open for trading 23 hours a day. So a Fill the Gap on these futures instruments occurs when today's 9.30am futures price is higher or lower than yesterday's 4.00pm futures closing price and acknowledges that the Cash market will often go back and test yesterday's closing price.
Fill the Gap is not so relevant for financial instruments like Oil, Gold or currencies as these tend to trade nearly all day (even if the have an underlying cash or spot market). Although gaps can occur after weekends or holidays.
In an upward trend, a gap is produced when the highest price of one day is lower than the lowest price of the following day. Thus, in a downward trend, a gap occurs when the lowest price of any one day is higher than the highest price of the next day.