A price gap in trading, whether in cryptocurrencies or traditional markets, means that there is a gap or difference between the closing price for a certain period and the opening price for the next period. These gaps often occur in traditional markets that operate with specific hours. In the cryptocurrency market, where trading continues around the clock, gaps are less common but can occur in some cases, such as:
1. After the release of very important news.
2. During periods of high volatility or low liquidity.
Benefits of price gap in trading
1. Opportunity to determine the future direction of the market:
If the gap is up, it may indicate strong buying momentum.
If the gap is down, it may indicate strong selling pressure.
2. Identifying support and resistance areas:
Price gaps are often key trading areas, and prices may retest these gaps later.
3. Trading based on the “Gap Filling Strategy”:
It means that the market may come back to fill the price gap before completing the trend.
It can be relied upon for trading, but under certain conditions:
1. Analysis of the general market trend:
If the gap reinforces the overall trend (bullish or bearish), you can consider entering a trade based on that.
2. Use other indicators for confirmation:
Don't rely solely on the price gap. Use indicators like RSI, MACD, or support and resistance lines.
