What are CME gaps?Have you heard traders talk about CME gaps? “There is a CME gap at $10 500” or “the CME gap has been filled”. Traders take great care with CME gaps as they know it is a handy price indicator to predict future movements. Today we discuss what CME gaps are and where you can find them.
What is a CME gap?Chicago Mercantile Exchange (CME) is the world’s largest financial derivatives exchange. You can trade various asset classes on the futures platform from energy, stock, fiat, real estates, metals and cryptocurrencies. Did you know Bitcoin is the only cryptocurrency that is being traded on CME? The Bitcoin futures contract was launched in 2017 and has a daily traded volume of more than $100 million. A CME gap implies there is an area on the BTC chart that has no trades. For example, BTC may have a gap between $23 600 and $26 700. A gap occurs when prices move sharply up or down with little time for trading to occur in between. So, if there are no orders between $23 600 and $26 700, the order to buy BTC at $23 600 may be filled quickly. CME gaps mostly form during weekends. Since CME does not trade Bitcoin over the weekend but cryptocurrency exchanges are open 24/7, a gap forms during weekends.
95% of CME gaps get filledMost, 95% to be exact, of CME gaps get filled at some stage. This makes it a pretty handy tool for traders. The question is when will the gaps fill? Some are filled within minutes, whilst others may take months. Luckily, there are only a few open at a time and when used correctly, can indicate which direction the Bitcoin market is likely to move. CME gaps generally remove immediate support and resistance lines and make it more likely for the gap to be filled.
How to use CME gaps in conjunction with other technical indicatorsThere are many factors that influence the movement of BTC. Volume, buy and sell pressure, support and resistance, fear & greed, momentum etc. Whilst it is not guaranteed that the price of BTC will gravitate towards a CME gap, they are extremely useful when used in conjunction with other technical indicators.
You can find the BTC CME futures market on TradingView. In the search bar, type ‘BTC1!’ You can quite easily spot a gap on any time frame like the 1 hour or 4-hour charts. Remember that gaps are not formed every weekend, only when Bitcoin makes a powerful move over the weekend.
So, when a gap has been filled, it means that the price returned to the pre-gap level and orders were filled.
In conclusion, do not risk your valuable cryptocurrencies with just one strategy. Be sure to set stop losses, use proper risk management and Do Your Own Research (DYOR).