Should I add positions when the gap is not filled for three days?

A gap in crypto trading occurs when an asset opens significantly higher or lower than its previous close, often due to news or market shifts, and may remain unfilled if momentum or institutional activity sustains the new price level.

Jun 26, 2025 at 07:49 pm

Understanding the Concept of Gaps in Cryptocurrency Trading

In cryptocurrency trading, a gap occurs when the price of an asset opens significantly higher or lower than its previous closing price, with no trading activity taking place in between. This phenomenon is common due to the 24/7 nature of crypto markets and external events such as news releases, regulatory updates, or macroeconomic shifts that can influence prices overnight.

When a gap forms, traders often look for signals on whether it will be filled — meaning the price returns to the level before the gap — or if it will remain open. A key question among traders is: should I add positions when the gap is not filled for three days?

Why Gaps Remain Unfilled for Multiple Days

Gaps may remain unfilled for various reasons. One major factor is strong momentum following the gap. If a cryptocurrency surges due to positive news, traders may continue buying during the next few sessions, reinforcing the new price level. In such cases, the market may treat the gap area as obsolete support or resistance.

Another reason involves institutional or algorithmic trading patterns. Large players might intentionally avoid revisiting old price levels, especially if they've established significant positions after the gap. Additionally, market sentiment and volume play a role — low interest in returning to the prior level can cause the gap to persist.

Evaluating the Risk-Reward Ratio Before Adding Positions

Before adding to a position, traders must assess the risk-reward dynamics. If the price hasn’t returned to the gap zone within three days, it suggests that the market has moved on. Entering at this point could mean chasing the trend without confirmation of continuation.

• Identify key support and resistance levels near the current price
• Check volume patterns since the gap occurred
• Assess broader market conditions and news flow
• Use technical indicators like RSI or MACD to confirm strength

Adding positions blindly based solely on the time elapsed since the gap appeared can expose traders to unnecessary risks, particularly if the momentum starts to wane.

Backtesting Strategies Around Gap Retests

Historical data shows that not all gaps get filled, and those that do often take varying amounts of time. Traders should conduct backtests on their preferred assets to determine how frequently gaps are retested within three days or longer.

To perform a basic backtest:

• Select a cryptocurrency pair with sufficient historical data
• Identify past instances where a gap remained unfilled for at least three days
• Analyze what happened afterward — did the price consolidate, reverse, or continue?
• Measure average gains or losses from entering positions at different intervals

This approach helps build a statistical edge rather than relying on intuition alone.

Psychological Factors Influencing Gap Filling Behavior

Traders often feel compelled to act when they see a gap that hasn't been filled. This stems from cognitive biases such as the anchoring effect, where individuals fixate on the original price level. However, in fast-moving crypto markets, old prices may no longer reflect current fundamentals or sentiment.

Emotional decision-making can lead to poor trade entries. It’s crucial to detach from past price behavior unless there's clear evidence that the market is likely to revisit it. Discipline and adherence to a predefined trading plan are essential in these scenarios.

Alternative Entry Points After an Unfilled Gap

Instead of focusing exclusively on the gap itself, traders should consider alternative entry strategies:

• Wait for a pullback or consolidation phase after the initial surge
• Look for breakouts above recent highs as signs of renewed strength
• Monitor order flow and liquidity concentrations
• Utilize moving averages or Fibonacci retracements for dynamic support/resistance

These methods provide more objective criteria for entering trades and reduce reliance on arbitrary timelines like the "three-day rule."

Frequently Asked Questions

What causes a gap to never get filled in crypto markets?

Persistent gaps often occur when strong fundamental or sentiment-driven moves take hold. Institutional accumulation, macro trends, or technological upgrades can shift investor expectations permanently, making the old price irrelevant.

Is it better to wait for a gap to fill before entering a trade?

Not necessarily. Waiting for a fill can result in missed opportunities, especially in trending markets. Instead, focus on confirming the current direction through volume, order book depth, and technical structure.

How does volatility affect the likelihood of a gap being filled?

High volatility increases the chances of erratic price action, which may either accelerate away from the gap or bring it back quickly. Low volatility environments tend to see slower retests or extended consolidation phases.

Can chart patterns help predict whether a gap will be filled?

Yes. Certain formations like flags, pennants, or head-and-shoulders patterns around gaps can offer clues about future price behavior. Combining pattern analysis with volume and momentum studies enhances accuracy.