Understanding Breakaway Gaps in Trading

You, that's a breakaway gap. Why? Why should that be a breakaway gap?

Because we are under time distortion.

That means all this back and forth price action

is just marking time.

That's the benefit of knowing how to use a time-based chart. I'm waiting for time.

When does it start? Right there, two o'clock in the afternoon,

New York local time

because the market is driven by an algorithm.

There's a time for everything, a beginning and an end, a pause,

a consolidation,

and distortion where everything you try to do will chop you up. So you wait.

Wait for what? Two o'clock, and then wait for displacement.

What does that look like? Right here. Takes out that short-term low. Boom.

But now we have what? We're late in the day.

This shaded area here is the buy-side imbalance,

sell-side inefficiency.

We have moved away from the high, and we moved aggressively away from the

seventy-five percent upper seventy-five percent range of this shaded area.

So I don't wanna see this area come back into.

I don't wanna see it come back up and trade into that.

But if it does, I would treat it as an institutional order

flow entry draw, in

other words, a partial entry and then sell-off.

Either way, it makes it a breakaway gap.

So we don't wanna see it trade back up above fifty percent or consequent

encroachment of this shaded area here.

And now we enter into another time of day, the two-fifty to three-ten

macro. My algorithm starts at two-fifty to

three-ten and will start

spooling price running for the liquidity that has not been purged yet.

What is that liquidity? The liquidity below the lows,

the seven AM New York

session time, the eight-thirty lows, the nine-thirty to

eleven lows. All of that is the draw on liquidity and/or,

in this case,

twenty percent of the weekly range. That would be anywhere in this area here.

But we start to see this energetic price run aggressive dropping lower.

That's algorithmic. This right here, just like I talked about earlier,

when we ran

up, you can use the fair value gap on the left

side of the curve, and we've seen

that happen right there. Then it breaks. This is a measuring gap.

We don't wanna see that filled in, just like we don't wanna see that.

What makes this a measuring gap? Well, between this high down to this low, we're

expecting that run, and about halfway, we're expecting a, a gap to form.

When it does and it moves away from it, we are not expecting it to come back into

that. That's a measuring gap. You have to know where the market's likely

to draw

to. Breakaway gaps are just gaps when you wanna see an energetic price run

away from an area you anticipated prior to it running away.

So you're expecting it to move lower, great.

When it finally does and it creates a gap like this,

your first thought should be,

"Okay, the first fair value gap after it starts

to run, that should be a breakaway

gap." We wanna see that, especially if we've been in consolidation

or experiencing

time distortion. Time distortion is simply a matter of time

between segments of time of the day where markets will start

spooling. That's it