I recently was reviewing some charts and realized something that many traders underestimate: gaps. The truth is, understanding what gaps are and how they work can significantly change your way of trading in the market.

Basically, a gap is that space that forms when the price closes at one level and opens at a completely different level the next day. It can happen due to important news, economic events, or simply changes in demand. The interesting part is that not all gaps are the same.

There are several types worth knowing. The common gap, which appears all the time and usually closes quickly without much impact. Then there's the breakaway gap, which is more serious because it marks the start of a new trend, usually after a period where the price was stagnant. Next is the continuation gap, which appears in the middle of a strong trend and confirms that it’s likely to continue in the same direction. And finally, the exhaustion gap, which is a warning sign because it indicates that the trend might be coming to an end.

Now, how do you use this in your trading? The first step is to learn how to identify them on charts using technical analysis tools. Then, it’s crucial to confirm that the gap aligns with other indicators and candlestick patterns to ensure it’s valid. Once you’re clear on that, you can apply different strategies. Some traders enter positions following the direction of the breakaway gap. Others prefer to wait for the price to close the gap, especially with common gaps. And there are those who use continuation gaps to add more positions in the trend’s direction.

But here’s the important part: gaps can be risky. They generally indicate volatility, and don’t always result in significant movements. Sometimes they close quickly without creating real opportunities. That’s why it’s essential not to trade gaps in isolation.

What I’ve learned is that gaps work best when combined with other tools and strategies. BTC is at $80.01K with a +1.61% in 24 hours, and ETH at $2.36K with +0.88%. If you observe these movements, you’ll notice that gaps are present in almost all markets. The key is to understand what type of gap you’re seeing and act accordingly, always with discipline and risk management. It’s worth spending time studying how these patterns work.