What is Bitcoin CME Gap? Strategies to make money with CME Gap
Description of What is Bitcoin CME Gap? Strategies to make money with CME Gap
The 45th week (W45) of 2020 begins with the CME Gap going up to nearly 1300 prices (7.5% respectively). In my opinion, this is a very large gap. Not only W45 week, but in 2020 we also see many other Gap.
In my article, I will give statistics and learn more about it with you. From there, come up with a suitable playing strategy.
First let's find out what BTC CME Gap is and see what it is.
What is Bitcoin CME Gap?
Bitcoin CME Gap . Definition
Bitcoin CME Gap is the difference between the closing price of the 6th session and the opening price of the 2nd session on the CME exchange.
For those of you who don't know: Chicago Mercantile Exchange (Chicago exchange), they allow users to trade BTC Futures. Time from Monday to Friday of the week, off Saturday & Sunday.
Saturday & Sunday CME is closed, but most other exchanges like Binance , Coinbase, FTX ,... they still allow users to trade normally. And of course the price is still running during that period.
By the following Monday, when the CME opened, the price ran and deviated from the closing price.
At this point the CME Gap is formed.
Note: Usually Gap occurs between Monday and Friday of the previous week, but there are times when Gap is formed within the week.
OK, so what is Fill gap or Fill CME Gap?
What is Fill CME Gap?
Is the price action to return to the gap (Gap) mentioned above to fill that gap.
There are 2 types of fill gap: fill up or fill below.
Fill price up
Fill price down
For the same reason, we will also have different playing strategies.
I will go into more detail below. But first, let's find out the reason to explain this phenomenon?
The reason the Gap was filled, I have not found a convincing enough opinion. But the fact that the gap is filled, then the price follows the previous trend can be explained as follows:
- Previously, there was a price zone that the trader had set on the floor, but it was not matched because the floor was closed at the end of the week. This group will have the need to buy/sell BTC when the price returns to that area
- Therefore, when the price returns to the original price area - the price to pick up (before the gap), the above group of traders will execute their previous buy and sell orders.
- This causes the price to just fill the gap, then the previous trend is pushed by these traders themselves.
Some statistics about BTC CME Gap
From the beginning of 2020 to the end of November, 2020:
- There are 47 CME Gap.
- There are 43 CMEs that have been filled, 4 Gap have not been filled (91% Gap is Filled).
- 25 Gap was filled on the 2nd day (accounting for 53%).
- The largest % gap on May 8 was up to -12.54%, deviating from -1265 prices.
- The biggest gap in price deviation is on 11/30 (currently), 1280 price deviation. This is the current gap, the end of November. And I'm also the most worried about this gap. At the moment, BTC is in a sensitive period & has just entered the recent strong growth phase. Any action of BTC (especially large fluctuations - if fill Gap 1280 price) will shock Altcoins & negatively impact the market. Below I will talk more deeply about the strategy of playing according to CME Gap.
Note, these are the statistics of BTC from the beginning of 2020 until now. In fact, since the CME exchange opened for BTC Futures trading, the data shows that about 95% of the gaps have been filled.
Here are the statistics of the main CME Gap times in 2020:
That's the actual data, so I myself don't try to explain why fill. I will take it for granted. From there, form your playing style with each CME Gap (specifically below).
If you know that "obvious" of it, how is the strategy to play it?
Safe trading strategy with CME Gap
As you can see from the above statistics, most of the Gaps are filled in on the first day of opening the session (Monday).
So from Monday, you need to take action to seize the opportunity.
Here I will divide into 2 trading schools to suit each brother.
CME Gap Trading for Spot Trading
With CME Gap down (2nd opening price lower than 6th closing price):
- The price will tend to go up to fill the gap.
- Soup to find a nice entry point after opening.
- The stock is sold at the fill gap, that is, the closing price of the previous week.
- You can hold BTC to lock in a higher price. However, this method is only for those with good technical analysis knowledge.
With CME Gap up (2nd opening price is higher than 6th closing price):
- The price will tend to go down.
- The soup was bought at Friday's closing price (refer to the image below).
Of course, the CME Gap only helps us determine the trend of the price at that time. In the long term, how your trading/holding trading plan depends on many other factors. Including BTC.D or Bitcoin Dominance .
Brothers trading Altcoins or trading coins in groups like DeFi or Oracle coin,... even more need to pay attention to the trend of BTC & BTC.D
Read more:
Learn about Bitcoin Dominance
Oracle coin trend
Trading CME Gap for Margin Trading
With CME Gap down (2nd opening price lower than 6th closing price):
- The price will tend to go up to fill the gap.
- Take a long position and close the order at the gap fill price.
With CME Gap up (2nd opening price is higher than 6th closing price):
- The price will tend to go down.
- Align short orders.
Fill CME Gap to date has not had a satisfactory explanation. I myself have not found a correlation between the gap (GAP) and the times the price fills.
However, looking at historical data, all Gaps are Filled. And that is our opportunity to profit from the market.
Note: The CME Gap is just a way to help us determine the upcoming direction of the price & the target price can be reached, not a signal to make a decision at the time of the Gap. Brothers trading buy and sell or long short also need to know about PTKT to determine the entry point.
