Weekend gaps and how to protect against them

The market closes at the weekend; the world does not. News on Saturday and Sunday is priced in the
moment trading resumes — and the opening price can be a long way from Friday’s close.

1. What a gap is

The space between Friday’s closing price and Monday’s opening price. On major pairs a gap is usually
small, a few pips. But after a large weekend event it can run to hundreds of pips.

2. Why it is more dangerous than ordinary volatility

Because a stop loss does not protect you across a gap. If the open jumps past your
stop level, the position closes at the first price that can actually be filled — not at the level you
set.

An example: you buy EUR/USD at 1.0850 with a stop at
1.0820, a planned risk of 30 pips. Major news over the weekend, and the market opens at 1.0740. The
position closes around there, for a real loss of about 110 pips — close to four times
what you budgeted.

3. High-risk weekends

• Elections in major economies, and referendums.
• Central bank conferences and major international summits.
• Escalating geopolitical tension.
• An ongoing banking crisis — rescue decisions are usually announced at the weekend,
  precisely because the market is closed.

4. Four ways to handle it

Close everything before the weekend

The simplest and most complete answer. You pay the spread
to re-enter on Monday in exchange for sleeping soundly. For an intraday strategy this is the sensible
default.

Reduce size

If the strategy requires holding, close part of the position on Friday. Gap risk falls
proportionally.

Only hold with a profit cushion

Carry over the weekend only those trades already far enough in profit that an average gap will not
push them into a serious loss.

Avoid weekends with events

Check the calendar before Friday afternoon. If anything from the list above is scheduled, stay
out.

5. What not to do

Do not rely on hedging to cover a gap.
Opening an equal position the other way does lock in the profit and loss, but you still pay the spread
twice and swap on both sides — and at the open you
still have to decide which side to close, usually in a hurry while the market is moving.

6. About margin

Many brokers raise margin requirements before the weekend or ahead of major events.
An account sitting at a 200% margin level on Friday
afternoon can be pushed close to the warning threshold by that change alone, before price moves at all.
Check the broker’s notices on Thursday or Friday.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.