What is a gap ( price gap ) in the cryptocurrency market

A gap (Gap) in trading represents a sharp change in the price of an asset when the new opening price significantly differs from the previous closing price, creating a “gap” on the price chart.

Types of Gaps in Crypto Trading

1. Bullish gap (: the price opens significantly higher than the previous closing price.

2. Descending gap )bearish(: the price opens significantly below the previous closing price.

Reasons for the Formation of Gaps in the Cryptocurrency Market

1. Key Economic Events )interest rate changes, macroeconomic indicators(

2. Project Development Announcements )protocol updates, hard forks(

3. Mergers and Acquisitions in the crypto industry

4. Sharp changes in market sentiment

5. Order imbalance in low liquidity

6. Technical failures on trading platforms

7. Regulatory news and decisions of government authorities

Characteristics of Gaps on Cryptocurrency Charts

1. Price spikes with minimal or zero trading activity between levels

2. Increased volatility during the formation and after the gap

3. Potential reversal or continuation signal of the existing trend

4. Feature of the cryptocurrency market: despite round-the-clock trading, gaps occur due to sharp news and low liquidity on some pairs.

Trading Strategies Based on Gaps

) 1. Trading in the direction of the gap

• Buying after the formation of an upward gap ###trend continuation strategy(
• Selling after the formation of a descending gap )trend continuation strategy(

) 2. Gap Filling Strategy

• Opening a short position during an upward gap, expecting the price to return to the previous closing
• Opening a long position during a downward gap, waiting for a return to previous levels

3. Gap Level Breakout Strategy

• Buying on the breakout of the upper boundary of the ascending gap
• Selling on the breakout of the lower boundary of the descending gap

Examples of gaps in the cryptocurrency market

Example of an upward gap:

The XYZ token closes at a level of 50 USDT. A positive news about a partnership is published at night. The next day, XYZ opens at a price of 55 USDT.

• Gap size: 5 USDT
• Trading Strategy: Buying XYZ at 55 USDT with the aim of continuing the upward trend

Example of a descending gap:

Cryptocurrency ABC closes at 75 USDT. A negative security report about the project is published at night. The next day, ABC opens at 70 USDT.

• Gap size: 5 USDT
• Trading Strategy: Selling ABC at 70 USDT with the expectation of further decline or trend reversal

Main Gap Patterns in Technical Analysis

1. Exhaustion gap ###signals a potential trend reversal(

2. Exit gap )usually indicates the continuation of the existing trend(

3. Running gap )indicates the acceleration of the current trend(

4. Measuring gap ) provides a benchmark for determining the price target of the movement(

Risks and Features of Working with Gaps

1. Increased volatility after the gap formation

2. Possibility of false breakouts and signals

3. Probability of filling the gap )return of the price to previous levels(

4. The impact of news and events on the direction of movement after the gap

Recommended Practices When Trading Gaps

1. Tracking market news and events that could influence gap formation

2. Analysis of graphic patterns and trends before the formation of a gap

3. Setting stop-loss protective orders to control risks

4. Proper position size management considering increased volatility

It is important to consider that trading based on gaps is associated with increased risks and requires careful technical analysis. Before making trading decisions, it is advisable to consult with a financial advisor.