How does market jump when open at begging of week

Beginner Questions
1

Hello,

This is a probably a stupid question. I was watching the Eur/usd at the end of last week it closed at 1.3238 but it opened this week at 1.3325. How does that happen?

Thanks

2

It’s an optical illusion. Because your broker opens at 5 or 6pm eastern time. I use a broker that starts showing price at 1pm and I can see all the price movement that happened in the gap before your broker opened. A lot of times you can trade that gap though. Price usually fills the gap although it didn’t do such a good job of that this week.

3

Gaps like that can occur on the weekend because some trading is happening. Most of the trading is professional money in futures, but I think there is one spot retail broker that allows it as well. Unlike the stock markets which have opening gaps because of overnight events, spot forex has Monday morning opening gaps created by active weekend traders reacting to events. You can take advantage of it to trade in the direction of the Friday close (called filling the gap), but I would only attempt this with a fixed spread broker. I will try to find a link where trading the gap is discussed.

Edit: here is one link. There is another thread by Inner Circle Trader (ICT) who discusses the strategy.

http://forums.babypips.com/free-forex-trading-systems/40748-how-trade-gaps.html

4

After reading that thread, would it be a good bet to short the eur/usd and set my target just above the close of last week (say 1.325)? Hypothetically, if the last weeks trends have been bullish, would shorting the eur/usd now would still be doable as it would have to close the gap before continuing its hypothetical bullish trend.

5

There are gaps to be filled and gaps that won’t be. I did not trade this past weekend’s gap. It was too wide for my liking, but it could have produced about 30 pips.

6

Ok, nice to know. So just to clarify, it hasnt filled yet but it still a possibility? The bearish market for the last weeks is all the more likely that it will sooner or later?

7

If the gap doesn’t fill within 24 hours, I ignore it. Maybe ICT can answer your question.