Bitcoin CME Futures Gaps Are Filled With 95% Certainty, But Trading Them Is Risky (2024)

FAQs

What happens when a CME gap is filled? ›

Since CME Bitcoin futures are often used by institutional players, gaps can reflect their activity and market views. The tendency of Bitcoin prices to "fill" these gaps presents trading opportunities. Traders can use gap analysis to predict price movements and strategise their trades.

Understanding the Bitcoin CME gap

While CME is closed, trading still happens on other exchanges. The “CME gap” is when the opening price of a Bitcoin futures contract is significantly different from its closing price.

The analyst says that not all gaps are filled, and some take weeks before closing, however, as much as 95% of the gaps analyzed eventually were filled.

Timing Your Trades Around CME Gaps

Traders may position themselves before or after gaps, depending on their analysis and risk appetite. Some traders aim to capture the initial price momentum when the gap is closed, while others may take contrarian positions to capitalize on a potential retracement.

While filling a gap often signals a market correction, it's crucial to consider the broader market trend. In a down trend, a gap fill might not be as reliable for bullish trades. The stock could fill the gap only to continue its downward trajectory.

A stock gap is a large jump in a stock's price after the market closes, usually due to some news. When a gap has been filled, this means the stock's price has returned to its "normal" price; the pre-gap price. This happens quite often as the price settles after irrational buying and trading has stopped after the news.

Bitcoin futures contracts trade on the Chicago Mercantile Exchange (CME), which introduces new monthly contracts for cash settlement. The CME offers monthly BTC futures contracts for six months and additional quarterly contracts for each of the four upcoming quarters.

On Bitcoin charts, CME gaps are found by comparing the price levels at which the Friday close and Monday open differ. These gaps are frequently noticed by traders because they might later serve as support or resistance levels.

However, a position could be closed prior to expiration by trading out of the position. Please be aware that trading terminates at 4:00 p.m. London time on the last Friday of the contract month.

If you don't earn enough CME credits, you might not be able to renew your state board medical license. Most states require you to earn a specific number of CME credits over a certain time period to maintain your license to practice in the state.

What percentage of gaps get filled? ›

Gaps in the chart fill 80% of the time — Gaps act as a magnet, drawing short-term traders to chase that area as a price target. To “fill” means that at least the wick or shadow of the candle fills in the missing area in the chart.

Each type signifies different market conditions, with implications for strategy and risk management. The adage that all gaps eventually get filled might not always hold true, especially in the case of Breakaway and Runaway gaps. Waiting for breakout or runaway gaps to be filled can devastate your portfolio.

Gap trading offers opportunities for profit, but it is not without risk. Gap traders should approach any new position with a well-defined plan, as well as the flexibility to adjust to evolving market dynamics.

To trade gaps successfully, one must first identify the type of gap and the underlying cause. This could range from earnings reports to broader market trends. It's crucial to analyze the pre-gap price trend, the volume during the gap, and the post-gap price levels.

The most effective way to do so is to avoid holding positions overnight. While requiring active management, closing positions during the trading day would limit exposure during downtimes in the evenings and during market close over the weekend. A less active strategy to hedge against gap risk is diversification.

A gap is said to “fill” when the price of a stock moves back to the pre-gap level. After a gap up, this means that the price falls back to the top of the pre-gap candlestick. After a gap down, this means that the price rises to the bottom of the pre-gap candlestick.

Exhaustion gaps are typically the most likely to be filled because they signal the end of a price trend. Continuation and breakaway gaps are significantly less likely to be filled because they're used to confirm the direction of the current trend.

This means that the company's stock price opened higher (gap up) than it closed in the previous day's session. Therefore, there is a gap in the stock price.