What creates a weekend gap in price? And if it is a true reflection of the strength/weakness of a particular pair, why is the gap often closed?
The market IS open through weekends… Most retail brokers do not show it on the charts, or allow clients to trade on weekends… So the market is moving during weekends… The gap is just the difference in price from the last bar that your broker shows on Friday… And the first it showed on Sunday… With all the price action in between cut out…
This weeks gap of the aud and nzd was caused by a dissapointing Chinese pmi release that happened Friday night after most retail brokers closed.
Such events are the reason that all of my open trades get closed by 3:30 est on Friday…whether they are in profit or not.
Yes like Banker928 said that market is opened at weekends too but course our brokers have a right to enjoy weekends too that’s why they keep their servers closed and the whole staff enjoy weekends too but the institutions and big capitalists make transactions regardless of whether it is weekend or not.Sometimes a news release on weekends cause a heavy movement in currency pairs so when the broker opens his server on Monday we see a gap over there.
and I suppose that gaps are often closed due to traders feeling price should return to where it was on Friday and start trading in that direction
Or perhaps it was due to the low liquidity that such a move occured and the market is retracing a portion of it (overextended). Again I may be completely and incurably wrong :D.
Still one thing to note is that when there are reports in the weekend I am definitely closing all my trades. For the other part I am not certain, hmm…