What is bitcoin CME Gap? How to use BTC gap IndicatorWhat is bitcoin CME Gap? How to use BTC gap Indicator
The 'Gap' in the CME (Chicago Mercantile Exchange) futures market, which offers a glimpse into the movements of institutional investors, is one of the key indicators many professional traders watch closely.
1️⃣ What is the Bitcoin CME Gap?
CME is one of the primary avenues for institutional investors to access Bitcoin. However, the CME Bitcoin futures market closes over the weekend (from Friday afternoon to Sunday afternoon, Chicago time, USA). Additionally, there is a one-hour trading break after market close on weekdays.
Conversely, spot exchanges like Binance and OKX, which we commonly see, operate 24 hours a day.
This difference is where a 'Gap' occurs. Especially during weekends, when the break is longer, gaps tend to be larger.
Bearish Gap: Occurs when the opening price after the CME market closes is lower than the closing price. This means that the Bitcoin price fell in the spot market during the off-hours.
Bullish Gap: Occurs when the opening price after the CME market closes is higher than the closing price. This means that the Bitcoin price rose significantly in the spot market during the off-hours.
Abrupt Psychological Shift: This implies that investor sentiment leaned heavily towards one side during the weekend.
Unfilled Order Blocks: The gap area is interpreted as a region where potential unfilled orders (buy/sell pressure) may exist.
Gap Fill Phenomenon: Many traders believe in the adage "gaps get filled" and use it as a trading strategy. This suggests a tendency for the price to move in the opposite direction of the gap, eventually attempting to cover the gap area. However, this phenomenon is not 'mandatory', and whether a gap will be filled immediately or much later must be judged through various analyses.
2️⃣ Easily Find CME Gaps
The Bitcoin CME gaps multi-timeframe auto finder indicator automates CME candle analysis and displays it intuitively on the chart.
⚡Indicator Features and Usage
Multi-Timeframe Gap Detection: 5-minute, 15-minute, 30-minute, 1-hour, 4-hour, and even 1-day candles! It simultaneously detects and displays CME gaps occurring across various timeframes. Whether you're a short-term trader or a long-term investor, you can check gaps according to your trading style.
Automatic Box and Label Display: The detected gap areas are drawn as rectangular boxes on the chart. Bullish gaps are displayed in green tones, and bearish gaps in red tones, making them easy to identify at a glance. The size of each gap (%) is displayed as a label above its respective box.
Highlight Function: Large gaps above a set threshold (e.g., 0.5%) are highlighted with an emphasized color. 'Big gaps' can have a greater impact on the market, so they should be noted.
Chart Price Synchronization: The price of spot charts from other exchanges may differ from the CME futures price. This indicator adjusts the price of the gap boxes to the price level of the chart you are currently viewing via the "Chart_price" mode. By using the "Chart_price" mode, you can more intuitively grasp the price level of the gap box on the spot chart and make direct trading plans on the chart of another exchange you are viewing.
Real-time Alerts: You can receive real-time alerts when a new CME gap is detected. You can also set alerts to notify you only about gaps from a specific timeframe. This is extremely useful when you can't continuously watch the chart during weekends or specific times on weekdays.
3️⃣ Trading Strategies
💡Gap Fill Strategy:
When a Bullish Gap Occurs: If the price breaks above a bullish gap but then falls back into the gap area attempting to fill it, one might consider a long position near the bottom of the gap, or a short position if the price fails to rebound from the top of the gap. Alternatively, a strategy of considering a short position in a resistance zone before the gap is filled is also possible.
When a Bearish Gap Occurs: If the price breaks below a bearish gap but then rises back into the gap area attempting to fill it, one might consider a short position near the top of the gap, or a long position if the price fails to fall from the bottom of the gap. Alternatively, a strategy of considering a long position in a lower support zone before the gap is filled is also possible.
💡Utilizing as Support/Resistance Areas:
Old CME gap areas can act as strong support or resistance lines when the price retests those levels in the future.
Observe whether the price encounters resistance and falls again when it reaches the top of a bearish gap, or if it finds support and rises again when it reaches the bottom of a bullish gap. Gaps that overlap across multiple timeframes can hold even stronger significance.
💡Trend Confirmation and Reversal Signals:
If a strong bearish gap occurs and is not immediately filled, but the price continues to fall, this could indicate the start or continuation of a strong downtrend.
If a strong bullish gap occurs and is not immediately filled, but the price continues to rise, this could indicate the start or continuation of a strong uptrend.
You can use the price movement after a gap occurs to gauge market momentum and apply trend-following or trend-reversal strategies.
For example, if a bearish gap occurs but is quickly filled within a few days and breaks above the top of the gap, this could be interpreted as an early sign that the bearish market has ended.
💡Multi-Timeframe Analysis:
When looking for key support/resistance levels, check not only the gaps of the current timeframe you are viewing but also gaps from higher timeframes (e.g., 4-hour or daily gaps on a 1-hour chart).
Gaps from larger timeframes are areas of stronger market interest. When making trading decisions in smaller timeframes, consider the location of important gaps from higher timeframes for risk management or to set entry/exit targets.
Short-term Gaps (5m, 15m): Most gaps occur within 1% and can be utilized for short-term volatility, high-leverage scalping, or day trading. They are suitable for quick entry/exit strategies, with caution against whipsaws. They tend to be filled before the 4-hour candle closes after the market opens.
Medium-term Gaps (1h, 4h): Can be referenced for swing trading or position trading. They can become significant support/resistance areas depending on price movement after the gap occurs.
Long-term Gaps (1d): Can act as major turning points in market trends or as important support/resistance levels from a long-term perspective. If a 'big gap' occurs, the possibility of a shift in the market's overall direction should also be considered. They usually occur during the weekend off-hours, and sometimes large gaps of over 3% occur.
A weekday short-term gap that was filled 4 hours ago.
A weekend long-term gap that saw a trend increase after a 4% big gap occurred.
4️⃣ Conclusion
The 'Bitcoin CME Gap Multi-Timeframe Auto Detector' indicator is a powerful tool that helps you not miss crucial price fluctuation points in the market.
However, no indicator should be blindly trusted. Gaps may not be fully filled, or the price may immediately break out in the opposite direction after surpassing a gap. Instead of relying solely on gap filling, it is crucial to analyze it in conjunction with other indicators to increase your win rate.
We hope you utilize the information gained from this indicator and combine it with your existing analysis methods (chart patterns, auxiliary indicators, macroeconomic analysis, etc.) to build more sophisticated trading strategies.
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