Why does closing price differ to next day open price?

I regularly notice a slight difference between the closing price of many currency pairs and its opening price the following day. Why does this occur?

I’ve been demo trading with a dealer using mt4 (5&3 decimal places) for about 6 months using daily charts for 10 popular pairs. Due to my location and time I can access trading I am several hours into the standard trade day. So far in my trades(to maintain consistency in testing) I have been using the previous trade day close price to set my stop losses and the minor difference to the new trade days opening price is mostly irrelevant. However after last weeks close and this weeks open prices there were a number of pairs that had big differences heading towards 1000 pips(on 5&3) from Friday close to Monday open.

What causes a the value of a “close of day” price to open in the next day at a different value?

Forex prices don’t tend to gap during the week, only between Friday close and Sunday open. I’ve been trading for four years and I’ve never had a noticeable gap between daily bars during the week.

Can you post a screenshot of this happening? And who’s your broker?

On occasions when there are news or events over the weekend, this can cause a gap as supply/demand for an asset at certain prices dramatically shifts. For example, this weekend, news that Lawrence Summers was bowing out of next Fed Chairman position caused weak USD sentiment at the week open of trading.

Now a 1000 pip gap is something I’ve never seen before so more details, or a screenshot as TheDayTrader suggested could help in figuring it out here, or with your broker. Good luck!

The actual closing price pertains to the share price on the close regarding trading about the LOCAL market to the day.Your next day’s launching price normally differs because of trading of this same share on OTHER markets throughout the period if the local market is finished, or the general trend of those other markets do your best.Based on which happens with all the U. Utes market, this Australasian, Oriental and Western European markets typically follow go well with.

He says it’s happening with currency pairs.


Hopefully this shows what I described, I hope it helps.(Let me know if I need to post a better image) There is 843 pip difference from close to open price (5&3 decimal places) for AUD/USD. Similarly there was 811 difference for USD/CAD and to a lesser extent, EUR/USD, USD/CHF and USD/JPY all had 600-700 difference over the weekend close price to the new trade week open price. Most other popular pairs I monitor had lesser variance but still in the hundreds of pips.

With my demo broker account, it’s not unusual to have some gap between midweek prices on the charts they supply, however they are usually insignificant to my calculations but this weekends gap was extraordinarily high which prompted my question.

My natural assumption was that close of trade prices on any day would be the opening trade price on the following trade day. Even during the week when there are markets open around the world still trading during the open/close time, forex doesn’t stop. So how can a close of day price at 11.59:59 be different to the next day open of trade at 00:00:00 regardless of mid week or weekend?

Is this an anomally of forex or is there some inconsistencies with the Pepperstone charts I rely on?

Weekend gaps are pretty normal, and usually caused by news or an event, as Pipcrawler mentioned. Nothing to worry about (usually). :slight_smile:

Hi Shinyhead,

You say in your description that this happens between daily bars midweek, which would be alarming, but the chart show that this is actually a weekend. There is often a gap between the market close on Friday and the reopening on Sunday - it’s not unusual and is a known hazard for anyone with open positions over the weekend.

What’s more the gaps you’re seeing (84.3 and 81.1 pips) fall broadly in the norm for weekend gaps, they’re sometimes smaller, sometimes significantly larger.

Hope this puts your mind at rest.

The gap I showed for the weekend was probably one of the largest that got my attention. To be honest, as I’m still demo trading and tweaking/observing before I go “cash live” daily gaps have probably not been something I’ve focussed on a lot, but these replies to my question that explain such big weekend gaps are normal have helped me consider how I hold trades and adjust stops over weekends particularly. I appreciate the feedback.

Although minor, there are regular midweek gaps on my charts, but not more than 100 pips on my charts(10 pips on 4&2 charts) which obviously have no bearing on my trading decisions.

Firstly though, I still don’t get how the end of week close price(or midweek) can differ from the next open day price at all! Logically, shouldn’t the market close price be exactly the same as the next days open price regardless of the day of the week or weekend? Even if there are world economic or political factors that effect the value, shouldn’t that only affect the value during open trade times?

And secondly, what considerations do I need to take in respect to holding trades over weekends when such variances can affect my position out of my control, when I am trading on daily prices that I can often only access my trading account mid-way through the standard trading day?

Some institutions like G10/20 love to publish some decisions over weekend, think at the Cyprus-‘event’. So most market-participants aren’t able to act. If you have a trading strategy, which get problems with gaps, there is only one advice. Don’t hold any position over weekend!

If you’re trading daily, gaps shouldn’t affect your trading, only if you are over-leveraged. If so, you should take smaller positions.

How this can differ - close and open? It’s easy, the market price of i.e. 1.31 at close changed because of any event and at open there is none willing to sell at 1.31, but only for 1.33. No trade would be done, if each buyer only want to buy at 1.31. So price moves.

Keeping a trade open over the weekend is an uncontrolled risk, since the opening price on Monday can technically be anything. Realistically, you may consider how close Friday’s price is to your stop loss. If Friday’s price is nearing your stop loss, you may choose to just accept the loss and close the trade before the market closes. If you keep it open, price may gap on Monday and open below your stop loss. In this case, you’d lose more than what you planned.

The opposite can also occur, where price may gap and open above your profit target, in which case you pocket the extra profit. If price is nearing my profit target or stop loss on late Friday, I just close my trade and be done with it.

Just to revisit the point about gaps between daily bars midweek - they shouldn’t happen.

The closing and opening of daily bars is somewhat a misnomer because the market doesn’t actually “close” and “open” between these bars. If go down to the M1 chart as the Daily bar opens, you shouldn’t be able to see any difference at all. A 10 pip gap midweek is artificial and is introduced by your broker - probably because of how their price servers roll-over rather than for nefarious reasons, but it’s artificial, could cause you losses and shouldn’t be there.

I’d take this up with your broker (get examples of it happening) and ask for an explanation. If happens on live accounts too, change brokers.

Thanks josch that explained it perfectly. I had some concerns that it may be an aberration in the system that could allow brokers to gain an unfair advantage. Perhaps they still do, but now I know it’s an acknowledged and accepted risk it allows me to factor this into the evaluation of my demo trading before I go “live”.

I appreciate that extra info Kevin, I had no idea setting stops/profits can become potentially irrelevant by unforeseen gaps particularly over the weekend. This is not something I had been giving any attention to since I have been assessing the methodology in my demo trading. Considering my trading plan is reasonably conservative, I’m anticipating these gaps aren’t going to be an issue but thanks for making me aware of the pitfalls.

Possibly a title for a new thread, but what is a normal gap? What is a common high gap? And what is the biggest gap you’ve ever seen?

Day Trader you have reignited the questioning of my opening post. I have accepted the weekend change in price thanks to some above posters, but as you have stated, the midweek market never closes even though there is an open/close price. And this is where I continue to have concerns whether I’m demo trading with a dodgy broker or if it is standard practice to regularly have a change in midweek close to open price of up to 30 pips(on 5&3) or up to 3 pips(on 4&2). That small amount of pip changes midweek is not going to affect my trading style, however it does make me question if my broker is sneaking a few pips here and there, what else are they taking advantage of that may affect me?