Breakaway Gap Explained: What is it and How to Identify it
A Breakaway Gap is a trading concept used by price action traders (also known as SMC or ICT Traders). A Breakaway Gap is a Fair Value Gap (FVG) that price does not return to, leaving it unmitigated. Understanding whether price is likely to revisit an FVG is crucial for traders to refine their strategies and make informed decisions. In this guide, you will learn how to identify when a Fair Value Gap functions as a Breakaway Gap.
What is a Breakaway Gap?
A Breakaway Gap refers to a Fair Value Gap (FVG) that remains unmitigated, with price failing to return to it. Identifying whether an FVG is a Breakaway Gap enables traders to anticipate areas where price could return to find trading opportunities. In order to do this, you’ll need to know how to identify a Breaker Block (BB), an Inversion Fair Value Gap (IFVG), and a Balanced Price Range (BPR).
How to Identify a Breakaway Gap
Identifying a Breakaway Gap is easy in hindsight, but the true skill is recognizing them as they happen, which is crucial for effective trading decisions. To do this, we’ll focus on three price action formations to help determine if an FVG will become a Breakaway Gap: A Breaker Block (BB), Inversion Fair Value Gap (IFVG), and Balanced Price Range (BPR).
How to Identify a Bullish Breakaway Gap
To identify a bullish Breakaway Gap, watch how price acts after a bullish Fair Value Gap (FVG) forms. There are three scenarios that can turn the bullish FVG into a bullish Breakaway Gap.
The first scenario is if price moves higher, closing above a bearish Order Block (OB), forming a bullish Breaker Block. The Breaker Block will now act as a support area if price retraces, turning the FVG into a bullish Breakaway Gap.
The second scenario is if price moves higher, closing above a bearish Fair Value Gap (FVG), forming a bullish Inversion Fair Value Gap (IFVG). The bullish IFVG will now act as a support area if price retraces, turning the FVG into a bullish Breakaway Gap.
The third scenario is if price moves higher, forming another bullish FVG that overlaps a bearish FVG. The area of the two overlapping FVGs is the Balanced Price Range (BPR). The BPR will now act as a strong area of support if price retraces, turning the FVG into a bullish Breakaway Gap.
How to Identify a Bearish Breakaway Gap
To identify a bearish Breakaway Gap, watch how price acts after a bearish Fair Value Gap (FVG) forms. There are three scenarios that can turn the bearish FVG into a bearish Breakaway Gap.
The first scenario is if price moves lower, closing below a bullish Order Block (OB), forming a bearish Breaker Block. The Breaker Block will now act as a resistance area if price retraces, turning the FVG into a bearish Breakaway Gap.
The second scenario is if price moves lower, closing below a bullish Fair Value Gap (FVG), forming a bearish Inversion Fair Value Gap (IFVG). The bearish IFVG will now act as a resistance area if price retraces, turning the FVG into a bearish Breakaway Gap.
The third scenario is if price moves lower, forming another bearish FVG that overlaps a bullish FVG. The area of the two overlapping FVGs is the Balanced Price Range (BPR). The BPR will now act as a strong area of resistance if price retraces, turning the FVG into a bearish Breakaway Gap.
Should I use a Breakaway Gap as an entry?
No, Breakaway Gaps are unlikely to hold as entry areas later because price typically doesn’t return to them. They represent unmitigated areas that often indicate strong directional movement, so focus on other price action structures like Order Blocks (OBs) or Balanced Price Ranges (BPRs) for entries.
What does a Breakaway Gap signal?
A Breakaway Gap signals strong directional momentum, indicating that price is unlikely to revisit the gap.
When is a Fair Value Gap considered a Breakaway Gap?
A Fair Value Gap (FVG) is considered a Breakaway Gap when price fails to return to mitigate it. This often occurs when price action structures like Breaker Blocks (BBs), Inversion Fair Value Gaps (IFVGs), or Balanced Price Ranges (BPRs) form, signaling strong directional movement.