What is a weekend gap in forex?

A weekend gap is a jump in price between Friday’s close and the first quote after the weekend. Because nothing trades in between, any stop loss that sits inside the gap is filled at the first available price, which can be far past the stop.

Why forex gaps at the weekend

The currency market trades around the clock during the week, “from 5:00 a.m. Sydney time on Monday morning until 5:00 p.m. New York time on Friday afternoon” (Krohn, Mueller and Whelan, Bank of Canada). News that breaks in between, such as an election result or an unscheduled policy decision, is priced in all at once when trading resumes. If buyers and sellers now agree on a very different price, the first quote of the week sits away from Friday’s last one.

Your broker’s hours are in MT5: right-click the symbol in Market Watch, open Specification and read the Sessions section. The forex market hours clock shows when the week closes and reopens in your time zone.

How a stop behaves in a gap

MT5 keeps stop loss orders on the broker’s server and checks a long’s stop against the bid and a short’s against the ask (MetaTrader 5 help). A triggered stop closes the position at the market. When the first bid of the week is already below a long’s stop, the stop triggers on that bid and the position closes there or at the next price available, not at the stop’s own level. The distance between the stop and that fill is slippage, at least as large as the part of the gap beyond the stop.

Where you see it in MT5

On an hourly chart, a gap shows as a jump between the last candle of Friday and the first candle of the new week. In the History tab (View → Toolbox → History), the closing price of a stopped trade sits beyond its stop loss level.

Common mistakes

• Treating the stop as the most a trade can lose. Over a weekend it is the planned loss, not the limit.
• Forgetting leverage. A large position can lose enough in one gap to reach the broker’s margin call or stop-out level at the open.
• Assuming every account has negative balance protection. For retail CFD clients of EU brokers, the rules ESMA set in 2018, now applied by national regulators, require negative balance protection per account. Elsewhere it depends on the local regulator and the broker’s terms, and without it a gap can leave the balance below zero.

Some traders close or reduce positions before Friday’s close for this reason. Others hold and size smaller. Either way, the risk is decided by the position size, which the position size calculator works out from the stop.

Weekend gaps and PipWarden

PipWarden does not close positions before the weekend. A trade still open on Friday keeps its stop loss and take profit at the broker, and if the market opens beyond either level, it fills at the first price available. Position size comes from your risk per trade, and the daily loss limit is checked before every order. Both shape what is opened, but a gap can still take a trade past its stop. Why forex traders lose money covers gaps among the other ways a loss grows larger than planned.