Gold Interday Gap Strategy

No, not all gaps fill. Studies suggest 70-80% of gaps eventually fill, but some gaps (especially breakaway gaps) may never fill or take months/years. Common gaps have the highest fill rate (near 90%), while breakaway gaps that start new trends may not fill for extended periods.

The primary gaps in gold occur over weekends (between Friday close and Sunday/Monday open). Since gold trades nearly 24 hours during the week, intra-week gaps are less common. Gaps can also occur around major news events or in gold futures during session breaks.

No! Only trade gaps that meet your criteria: Minimum size (0.3%+), classified correctly (don't fade breakaway gaps), have confirmation, and fit your strategy. Many gaps are too small or unclear to trade profitably. Quality over quantity.

You can't know for certain, but indicators include: Gap type (common gaps fill more often), catalyst (no major catalyst = likely fill), volume (low volume = likely fill), location (gap into S/R = likely fill), and confirmation signals (reversal candle, failure to extend).

Fading means trading opposite the gap direction expecting it to fill (short a gap up, long a gap down). Trading with the gap means entering in the gap direction expecting continuation (long a gap up breakaway). Choose based on gap classification.

Look for: Extended prior trend (15+ days), very large gap (bigger than recent), climactic volume that then fades, reversal candle on gap day, gap into major S/R, and extreme sentiment. Exhaustion gaps mark the final push of a trend before reversal.

Wait for: Reversal candle (hammer for gap down, shooting star for gap up), failure to extend in first 30-60 minutes, break back toward fill direction, declining volume after gap. At least one confirmation significantly improves success rate.

For gap fill trades: Stop beyond gap extreme + buffer (0.5× ATR). If gap high is $1,995 and ATR is $10, stop at ~$2,000 for short fade. For gap continuation: Stop where gap fills (below gap low for long). Time stops also useful - exit if no fill in 24-48 hours.

For analysis: Daily to identify gap. For execution: 1-hour or 15-minute for confirmation and entries. Monitor fill progress on 1-hour. Swing traders can use Daily for holding gap trades. Match timeframe to your trading style.

Volume reveals conviction: High volume on gap = Strong conviction, likely continuation or significant breakaway. Low volume = Weak conviction, higher fill probability. Volume declining after gap = Momentum fading, prepare for fill. Volume on fill attempt = Watch for reaction.

Island reversal: Gap one direction, consolidation, then gap opposite direction - creating isolated 'island' of price. Very powerful reversal signal. Trade in direction of second gap. Stop beyond island. Target extended as major reversal underway. Relatively rare but high probability.

High vol: Increase min gap size, require stronger confirmation, wider stops, smaller size. Low vol: Can lower gap threshold, higher fill confidence, tighter stops. Trending: Favor continuation trades with trend. Ranging: Favor gap fill trades. Adapt parameters to regime.

Gap fill failure: Price attempts to fill gap but can't complete fill, then reverses in gap direction. Strong continuation signal - gap zone now acts as S/R. Entry on reversal after failed fill. Stop below gap low (long after failed fill of gap up). Target new highs/continuation.

CVD shows net buying/selling. Gap up with negative CVD = Distribution into gap, likely fill. Gap up with positive CVD = Accumulation confirms gap, likely continuation. Use CVD to confirm whether smart money is with or against the gap direction.

Common gap fills: 65-75% win rate, 1:1 to 1:1.5 R:R. Breakaway continuations: 45-55% win rate, 1:2+ R:R. Expect 1-4 tradeable gaps per week in gold. Edge comes from proper classification - differentiating common from breakaway gaps is crucial for consistent profits.