On Fridays, Forex Brokers close their dealing desks and reopen on
the Monday mornings. There are however many countries where the
financial institutions are open over weekends and there are also many
news, political and financial events that will move the market on
Saturdays and Sundays. Because of this the Friday price is often
considerably different on a Monday morning when Brokers reopen their
trading facilities. This is known as the Forex Weekend Gap.
It must also be noted that these gaps are Broker specific. Not all Forex brokers close and open their dealing desks at the same worldwide time.
As reflected in a previous study done by Expert4x these gaps average between 32 to 11 pips depending on the currencies involved. The largest gaps vary between 147 pips and 51 pips over an eighty week period. 81% of five hundred and twenty four gaps studied, close within the same day that they occur. By close we mean the Monday price returns to the Friday price, whereby closing the gap.
The above facts immediately create two Forex trading opportunities that experienced traders have taken advantage of for years.
The first is the weekend straddle which, if you can find an appropriate broker, is the lowest risk trade in Forex trading. You would simply straddle the price at the close of trading on the Friday with pending orders and close any activated deals on the Monday morning. Although this sounds quite simple there are some trading skills involved.
The second opportunity is created by knowing that 81% of gaps close in the same day. This gives you the information you need for your next trade. You would simply enter a deal in the direction of the Friday closing price when the Monday morning price is known and trading commences. This trade is also not as simple as it sounds and care should be taken to use appropriate sized stops. Many traders use the fact that some brokers open earlier than others on a Monday morning to get advanced price movement information to assess the market sentiment for closing the gap.
When the gap is not closed the currency price often runs for hundreds of pips which creates a third online forex trading opportunity.
As can be seen from the above it is very important to study Forex Market behavior from many perspectives as the market creates great trading opportunities every day or every week as in the above case.
It must also be noted that these gaps are Broker specific. Not all Forex brokers close and open their dealing desks at the same worldwide time.
As reflected in a previous study done by Expert4x these gaps average between 32 to 11 pips depending on the currencies involved. The largest gaps vary between 147 pips and 51 pips over an eighty week period. 81% of five hundred and twenty four gaps studied, close within the same day that they occur. By close we mean the Monday price returns to the Friday price, whereby closing the gap.
The above facts immediately create two Forex trading opportunities that experienced traders have taken advantage of for years.
The first is the weekend straddle which, if you can find an appropriate broker, is the lowest risk trade in Forex trading. You would simply straddle the price at the close of trading on the Friday with pending orders and close any activated deals on the Monday morning. Although this sounds quite simple there are some trading skills involved.
The second opportunity is created by knowing that 81% of gaps close in the same day. This gives you the information you need for your next trade. You would simply enter a deal in the direction of the Friday closing price when the Monday morning price is known and trading commences. This trade is also not as simple as it sounds and care should be taken to use appropriate sized stops. Many traders use the fact that some brokers open earlier than others on a Monday morning to get advanced price movement information to assess the market sentiment for closing the gap.
When the gap is not closed the currency price often runs for hundreds of pips which creates a third online forex trading opportunity.
As can be seen from the above it is very important to study Forex Market behavior from many perspectives as the market creates great trading opportunities every day or every week as in the above case.
Alex du Plooy is a partner and trader at the online Forex trading
company Expert4x.com. He provides articles, videos, free and paid forex
course and tools, live trading and training webinars. Details of these
can be found at his Blog at [http://forextrading-wato.com] and his
services website http://forextrading-alerts.com
