Recently, I started analyzing a pattern that many traders overlook but can be quite profitable if you understand it well. I'm talking about gaps, those spaces that form when there is a difference between the closing price of a session and the opening price of the next one. It seems simple, but what gaps really are is more complex than it appears.

The interesting thing is that these gaps appear for specific reasons: important news, economic events, changes in supply and demand. And here’s the key point: not all gaps are the same. Some are just minor movements, while others are signals of strong trends that are about to come.

In my experience, I’ve identified four main types. There’s the common gap, which occurs frequently and closes quickly without much impact. Then there’s the breakaway gap, which appears when a new trend begins after consolidation. This one carries weight because it indicates a strong move in a direction. Next is the continuation gap, which appears in the middle of a strong trend and suggests that the trend is likely to continue. And finally, the exhaustion gap, which happens at the end of a trend and may indicate an upcoming change in direction.

Now, how do we trade with this? The first step is to identify these patterns using technical analysis tools on the charts. Then, confirm that the gap aligns with other technical indicators and candlestick patterns to ensure it’s valid.

I have three main strategies that work. The first is breakout trading: entering a position following the direction of the breakaway gap. The second is mean reversion: waiting for the price to close the gap again, especially useful with common gaps. The third is trend following: using continuation gaps to add more positions in the prevailing trend’s direction.

But we have to be realistic. Gaps can indicate high volatility, which brings risks. Not all gaps result in significant movements; some close quickly without creating real opportunities. That’s why it’s important not to obsess only over gaps.

The key is to combine what gaps are with other tools and strategies. Look, right now BTC is at $69.85K with a +3.62% change in 24 hours, and ETH at $2.14K with +3.83%. These are interesting movements that you could analyze with this gaps framework. If you truly master this pattern and combine it with solid analysis, you can find unique opportunities that other traders miss. It’s worth spending time understanding how gaps work in today’s market.