Weekend gaps - what do they tell us?

As we all know, forex is a 24hr market and the only closed session is across the weekend. This means there is only one meaningful gap in prices per week, the gap between the Friday Close and the Monday Open.

My strategy rules take no account of this gap, I ignore it as meaningless for long-term trades off the D1 chart.

But am I wrong to ignore the gap? What messages do long-term forex traders get from the weekend gap? Is it a genuine trading opportunity in itself?

There is an ongoing risk that trades held over the weekend could suffer from negative news resulting in a adverse price spike at Mon morning Asian opening.

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This is true, but can we wring some help for trading from this?

I do hold that only bad news comes out when the markets are closed. But as we’re dealing in exchange rates between pairs of currencies, in most cases, what is bad news for one must be good news (to some extent) to the other? But actually, if most bad news implies greater financial risk, then does this not suggest a potential bias against risk-on currencies?

Therefore, is being negative on risk-on currencies across the weekend a prudent trading tactic? And vice versa on risk-off currencies?

Largely ignore it as it often filled in by Asia.

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I think this is true.

But I suppose we need two definitions of weekend gaps - temporary, which are closed within the Monday range, and permanent, which are not closed before Monday is out and become permanent features on the D1 and W1 charts, whether or not they are later bridged within the same week.

I’m supposing the temporary gaps tell us next to nothing. Whether that’s right or wrong, my interest lies with the permanent gaps. Perhaps the mere fact that a gap was not closed by the Asian session might be valuable to note.

I agree certainly. I think gaps are always closed at some point and remain targets for price if in the cross hairs. But as you say if price doesn’t close it then I would be looking at other reasons as to why that might be. It’s far less common for semi-permanent gaps to be left so what happened of the weekend to cause the gap and change in sentiment. For me trading EURUSD I would immediately look to see if the same gap has been left on DXY.

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Weekend gaps in the forex market might offer us useful information about market movements as well as any possible future prediction. Forex traders should be mindful of potential risk events that occur over the weekend that might have a negative impact on any open positions. During the week, the forex market is open 24 hours a day, however it closes on weekends. However, when time zones shift, the weekend is shortened. The New York Exchange starts on Sunday at 5 p.m. local time. It shuts at 5 p.m. on Fridays and reopens 48 hours later to start the new week.

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Since the market gaps are the largest on weekends and nobody is trading (well almost nobody), there is no one to set the price. So if you have a perspective on market behaviour (i.e., the expectation of an event), you can try to buy or sell with the expectation that the lack of buyers or sellers will eventually lead to a trend reversal.

I always stay out of the market until the gap gets filled. So I always wait before taking an entry after the weekends. The gap can cause slippage and it is better to wait for some time.

I think it is really important to keep an eye out for the weekend gaps. In fact, trading with a weekend gap is a common technique among forex traders. Many news announcements and global events that have an impact on currency values might occur during the weekend. So even if you are chilling on your weekends, don’t completely forget about forex fundamental analysis.

Weekend trading can be quite useful for many traders in the forex market, but traders need to be aware of the major news events that might impact it.

Actually gap occurs because of the fundamentals during the weekends! If you are a long-term trader, then there is no issue indeed!

No, the gap occurs because big banks are still trading over the weekend, just at smaller volumes.

I’m not sure what the gaps tell us, I think of them as meaningless, however I know on the DAX one trader that goes in the opposite direction of the gap on the daily. I guess I could analyze how often the gap goes for/against once I get out of bed rest

Nothing stop confusing ur self

Usually the gap can be traded when the Tokyo market opens at 7 PM EST. So USD/JPY is a perfect pair to trade after the weekend gap. But I personally never trade until the gap is filled.

The gap often fills and I often find if it starts below it will hit it and go back down

Weekend gaps occur because the market with the change in time zone market squeezes. The market opens at 5 p.m sunday EST in sydney and closes at 5 pm on Friday. And again after 48 hours forex trading resumes.
Gaps in the market can also occur in a short-time frame like after a major news announcement.

Weekend gaps tend to get filled either partially or fully. This can happen very fast or after a long duration.