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

Tony "The Bull" Severino

5 years ago

3 mins read

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If you’ve been a crypto investor or traded Bitcoin at all during 2019, chances are you’ve heard repeated discussion surrounding the “gaps” on Bitcoin futures charts offered by the Chicago Mercantile Exchange.

But what are gaps? And are these gaps nothing more than hype, or is the validity in taking trades based on the location of these gaps? One crypto analyst has set out to find out and has done a deep dive into the statistics of CME futures gaps and their correlation in the crypto market.

Bitcoin CME Futures Gaps Analyzed

Cryptocurrencies are an always-on, 24/7, 365 days a year market. However, traditional trading desks like CME Group offer weekday trading sessions. If Bitcoin makes a powerful weekend move, and it often does as liquidity tends to be the lowest on weekends while traders are away from their desks, it can leave a gap between Friday’s late evening close and Monday’s morning open.

Gaps commonly appear on the price charts of financial assets, when the asset’s price deviates significantly from a trading period’s close to when trading resumes. Gaps are even more common in speculative assets where extreme emotions like fear or exuberance can push the price higher or lower than normal market fluctuations.

Bitcoin CME futures gaps have become a sort of a meme across the cryptocurrency industry, with many analysts balking at any claims of validity, while others swear by the trading strategy – and set orders near where gaps need to be filled.

https://twitter.com/thewhiskyguy/status/1202377564649664514?s=21

One particular cryptocurrency analyst decided to get to the bottom of if CME gaps were a helpful tool to assist traders with taking positions or predicting price movements, or if they are nothing more than a meme.

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.

Gaps Almost Always Fill, But Trading Them Is A Losing Strategy

Taking the data a few steps further, the analyst found that over 50% of Bitcoin CME futures gaps were filled on the day of the new trading session open, with 30% of the remaining gaps filled later during that week’s session. Fewer and fewer gaps are closed the further the time goes by.

The largest gap on the chart was a $1,085 price move or 12.47% of Bitcoin’s price at the time, and the smallest gap was just $5. The average gap difference was $225, or 2.87%.

The data is certainly encouraging that there’s correlation for Bitcoin traders to take advantage of, however, the analyst says that had each of the 100 gaps analyzed had been traded, the trades would have been stopped out 53 out of 100 times, making the strategy a losing one, even despite the 95% certainty in which gaps are filled.

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.