Forex market open on saturday and sunday
Gaps in forex charts are the price area over which price action has jumped. In other words, no trades took place in the price area. Statistically, gaps are screaming to get filled. But often a partial fill will occur on Sunday afternoon or evening and that is where we hope to take some profit.
Often, finance ministers and central banks will release meeting minutes and other data on Friday after market close and Saturday. A lot of market-shaking news can be broadcast during this time.
When significant news is released, the market starts moving early on Sunday afternoon and gets more volatile as 5 pm approaches.
Most brokers open trading at 5 pm on Sunday. Some start their data feeds earlier. The gap is due to other trading taking place on Friday afternoon after the given broker has closed trading and on Sunday afternoon before the given broker has opened for trading. Primarily you will need a broker that opens early enough to take advantage of the closing of the gaps. I have seen the market gap early, start closing around 4 pm and completely close the gap before 5 pm.
If I was trying to trade the forex weekend gap with a broker that opens at 5 pm, I would have totally missed that trade. That having been said, you can still have successful gap trades if your broker opens at 5 pm. Any later than that and you may want to open an account with another broker so you can consistently trade the gaps.
Because of that, I still maintain a small account with Oanda. You can enter trades on Saturday if you like. The concept is the same, gap traders think that price will always fill a gap. Every Sunday gap seen this year has been filled but one trade moved pips on the opposite direction before the gap was filled two weeks later. Another gap was filled within two days but the price move 87 pips on the opposite direction before returning to fill the gap.
I have compiled statistics in order to analyse the profitability of gap trading. To compile these statistics I needed a basic gap trading system. For the purpouses of this analysis I decided to use a very basic system. Provided the gap is 20 pips or wider trades are entered as soon as the market opens on Sunday.
As soon as target or stop is hit. Since the Forex market has no central exchange there is no official open or close time in Forex. This means that gaps may appear different dependant on your broker. This could lead to different results than the ones below.
Five out of the nine trade were losses. This is attributed to the win loss ration of 2: These stats show how unreliable gap trading can be. This year we have had nine gaps, eight of those gaps have been filled and one remains unfilled. The table below shows you the floating pip loss you would have needed to endure for each gap to close.
Three of these nine trades required a floating loss of more than pips before the gap was filled. It is illogical to leave a trade open for pips in the hope of making 43 pips when the gap is filled. One of the trades had a pips floating loss and the one that is currently has had pips.
So even though most gaps are filled some require you to suffer large floating losses before being filled. However, I have only tested one pair with four months worth of data. To be definitive I would need to test at least five pairs with one year of data. I might do this in future but at the moment it is more important to address the flawed wisdom in the Forex community. If I see a good trade I wont let an unfilled gap keep me out of the market. The statistics make it clear that gaps are not always filled quickly, so they should not impact my trading decisions.
I think the prevailing wisdom about gap trading in Forex is wrong. While it might be possible to make some profit trading gaps it is not as easy as people suggest.
So next time somebody tells you that the price has gapped so you should trade the fill, tell them that gap trading is a roll of the dice. Click here to cancel reply. Email will not be published required. I trade gaps every Sunday that the market offers a viable one to enter. I rarely enter at the open but wait to see if gap is going to widen as many did this past Sunday. Because of the election volatility I exited most of my gap trades well before they closed.
I never said definitively that gap trading is not profitable. With different strategies gap trading can be profitable. My guess is that non of the EUR denominated pairs are. If you are going to do gap trading then I would recommend reading lots of news on the weekend. With everything going on in Greece my guess is that a lot of the gaps for the EUR have not closed as well as they usually do.
I have read the theory, your work on the facts is extremely interesting, a most interesting analysis. Yeh, there has been a few recently. I think I might take a look at a few more pairs and expand on this post. Hey DolphinTrader, glad your enjoyed the post. I am guessing this answers your question from yesterday?