Is the gap necessarily filled? There are exceptions in three cases

In crypto trading, gaps occur when an asset's price opens significantly higher or lower than its previous close, often due to volatility from news or market shifts.

Jun 12, 2025 at 07:07 am

Understanding the Concept of Gaps in Cryptocurrency Trading

In the context of cryptocurrency trading, a gap refers to a situation where the price of a digital asset opens significantly higher or lower than its previous closing price, with no trading activity occurring between these two points. This phenomenon is commonly observed during periods of high volatility, especially when markets react strongly to news events, regulatory changes, or macroeconomic factors.

Gaps are particularly relevant in crypto due to the 24/7 nature of the market. Unlike traditional stock exchanges that close overnight, crypto markets never stop, but significant price movements can still occur between major trading sessions or after sudden announcements. Traders often wonder whether these gaps will eventually be filled — meaning the price will return to the level before the gap occurred.

Key Insight: The idea that every gap must be filled is a common misconception in both traditional and crypto trading.

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Why Some Believe Every Gap Must Be Filled

Many traders operate under the assumption that gaps tend to get filled because prices naturally revisit areas of imbalance. In technical analysis, this belief stems from the notion that untested price levels create uncertainty and attract retracements. For example, if Bitcoin (BTC) closes at $30,000 and opens the next day at $31,000 without any trades happening in between, some analysts believe the price will eventually return to $30,000 to fill the gap.

This logic applies more consistently in traditional markets, where gaps are limited to specific timeframes like overnight or weekends. However, in the continuous environment of cryptocurrency, the dynamics change. Price action is non-stop, and gaps may not always behave as expected.

Important Note: In crypto, gaps can appear and disappear quickly due to rapid price fluctuations and varying exchange data feeds.

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Three Exceptions Where Gaps Do Not Get Filled

While many gaps do get filled over time, there are notable exceptions. These scenarios typically involve strong momentum, fundamental shifts, or extreme market sentiment that prevents a retrace to the original gap area.

• Strong Trend Continuation: When a powerful trend is underway, the market may not look back. For instance, if Ethereum (ETH) surges due to a major network upgrade, the upward momentum could carry the price far beyond the gap zone without revisiting it.
• Fundamental Shifts: Events such as regulatory approvals, institutional adoption, or project upgrades can cause permanent shifts in value. If Solana (SOL) gets listed on a major global exchange, the resulting demand surge might push the price into a new range without filling prior gaps.
• Extreme Market Conditions: During black swan events or panic selling, gaps can form and remain unfilled indefinitely. The 2020 "Bitcoin crash" saw massive gaps form that were never fully closed, especially during the initial drop phase.

Crucial Detail: Each exception reflects a shift in market psychology and structure that overrides the typical behavior of price retracing gaps.

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Analyzing Gaps Using Technical Tools in Crypto

To assess whether a gap might be filled, traders use various technical indicators and charting tools. Candlestick patterns, volume profiles, and moving averages help identify potential support and resistance zones around the gap area.

Here’s how you can analyze a gap effectively:

• Check Volume at the Gap Zone: Low volume during the formation of the gap suggests weak interest and a higher likelihood of the gap being filled.
• Use Fibonacci Retracements: Overlay Fibonacci levels to see if the gap lies within a key retracement zone. If so, the probability of a return increases.
• Monitor Moving Averages: If the gap occurs above or below a major moving average (e.g., 50-day or 200-day), it may indicate a stronger trend that avoids retracement.

Pro Tip: Combine multiple tools for better accuracy rather than relying solely on one indicator.

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Practical Steps for Trading Around Gaps

If you’re considering trading based on gap behavior, follow these steps to improve your strategy:

• Identify the Gap Type: Determine whether it’s a breakaway gap, runaway gap, or exhaustion gap. Each has different implications for future price movement.
• Set Entry Points Carefully: If you expect a gap to be filled, wait for confirmation via candlestick reversal patterns or volume spikes before entering a trade.
• Place Stop-Loss Orders Strategically: Set stops just beyond the gap area to avoid getting stopped out by false breakouts or short-term volatility.
• Use Time-Based Filters: Some traders set time limits (e.g., 5–10 candles) for a gap to be filled. If it doesn’t happen within that window, they abandon the trade idea.

Critical Reminder: Always manage risk carefully, as gaps can behave unpredictably in fast-moving crypto markets.

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FAQ: Frequently Asked Questions About Gaps in Crypto

Q: Are all gaps visible across all exchanges?

A: No. Due to differences in liquidity and exchange-specific price feeds, gaps may appear on one platform but not another. It's important to verify using reliable charting platforms like TradingView or CoinMarketCap.

Q: Can gaps be used as standalone signals for trading?

A: While gaps can offer useful insights, they should not be used alone. Combining them with other indicators like RSI, MACD, or volume helps filter false signals and increase accuracy.

Q: How long does it usually take for a gap to be filled?

A: There’s no fixed timeline. Some gaps get filled within minutes, while others remain open for weeks or even months. Timeframe analysis and market context play crucial roles in predicting outcomes.

Q: Is it possible to automate gap-based trading strategies?

A: Yes. Many algorithmic traders use bots to detect and execute trades based on gap conditions. However, constant monitoring and adjustments are necessary due to the volatile nature of crypto assets.