Gap risk and weekend risk: what happens when price jumps past your stop

Gap risk is the risk that price jumps from one level to another with no trading in between, so your stop loss is filled at the next available price rather than at the level you set. Weekend risk is the most common form of it in forex: the market closes on Friday evening, news keeps happening, and the price on Sunday evening can open some distance from Friday's close. A normal stop limits your loss in normal conditions; in a gap, the loss can be several times larger than planned.

This guide explains why gaps happen, what they do to stop orders, limit orders and margin, how guaranteed stops work, and how to size positions you plan to hold through a weekend or a major event. The slippage guide covers the everyday version of this problem; gaps are the extreme end of it.

What a gap is

On a chart, a gap is a space between one bar's close and the next bar's open where no prices were traded. In forex this mostly appears on the first bar of the week, because the spot market trades around the clock from Sunday evening to Friday evening New York time and then stops. The market hours guide explains the trading week, and the market hours tool shows the sessions in your own time zone.

Gaps also happen during the week in a less visible form. When a major announcement hits, liquidity providers pull their prices for a moment, and when quotes come back they can be some distance away. A one-minute chart may not show a clear hole, but in practice there was no price at which you could have traded in between. For a stop order, that is the same thing as a gap.

Other instruments gap more often than forex. Share CFDs and many index CFDs follow exchange hours, so they can gap every morning when the underlying market opens. Commodity CFDs have daily breaks. If you trade those as well as currencies, gap risk is a daily matter rather than a weekly one.

Why gaps happen

A price only exists when someone is willing to trade at it. Gaps appear when new information arrives at a time when nobody is trading, or when the information is so significant that nobody is willing to trade at the old prices.

• Weekends. Elections, referendums, policy announcements, geopolitical events and major company or government news can all land on a Saturday or Sunday. The market prices them all at once when it reopens.
• Scheduled data and central-bank decisions. A surprise in a major release can move price faster than orders can be matched at each level. See how economic data moves forex for the mechanism.
• Unscheduled policy changes. A central bank or government can change policy without warning. These are rare, but they produce the largest jumps.
• Thin liquidity. Holidays, the quiet hour around the daily rollover and the early Asian session on Monday can all have few participants. A relatively ordinary order flow can move price a long way when the order book is thin. The guide on why spreads widen explains what thin liquidity looks like in a quote.

What a gap does to your orders

Ordinary stop losses

A stop loss is an instruction to close the position with a market order once price reaches a level. If price trades smoothly through your level, you are filled at or close to it. If price jumps past it, the stop is triggered at the first available price beyond it, and that is where you are filled.

Suppose you are long EUR/USD with a stop at 1.0760, and Friday's close is 1.0800. If the market reopens on Sunday evening at 1.0650, your stop is not filled at 1.0760, because no trades took place there. It is filled at or near 1.0650, and possibly worse if the first prices after the open are thin. You planned a 40-pip loss; you took a loss of 150 pips or more.

The stop-loss guide explains how to place a stop where the trade idea is wrong. Gaps are the reason that guide describes a stop as a risk-reduction tool, not a ceiling.

Limit orders and take-profits

Limit orders work the other way. A buy limit or a take-profit is an instruction to trade at a stated price or better. If price gaps through it in your favour, you are usually filled at the better opening price, though this depends on the broker's execution policy, which you should read. The asymmetry is worth understanding: gaps tend to hurt stops and can help limits, but nobody plans their risk around the help.

Pending entry orders

Stop entry orders, such as a buy stop above the market for a breakout, are filled as market orders when triggered. If price gaps up through your buy stop, you enter at the higher opening price. Your planned stop distance is now larger than intended, so the position carries more risk than you sized for. Some traders cancel pending entries before the weekend for exactly this reason.

Margin and stop-outs

A broker's stop-out works in the same way as a stop loss: positions are closed at market prices once your margin level falls below the threshold. In a large gap, the closing price can be well beyond the stop-out level, and the account's equity can fall below zero before the closure completes. For retail clients of EU- and UK-regulated brokers, negative balance protection means the loss cannot exceed the funds in the account. Professional clients and clients of some offshore entities may not have that protection. The margin call and stop-out guide and the guide to ESMA leverage limits and negative balance protection explain both.

Some documented examples

These episodes are well documented and show the different ways gaps arise. Exact figures vary between sources and data feeds, so we describe them in general terms.

• Swiss franc, 15 January 2015. The Swiss National Bank removed its 1.20 floor under EUR/CHF without warning, on a Thursday morning in Europe. The pair fell far below 1.00 within minutes, with almost no trading in between. This was an intraweek gap caused by an unscheduled policy change, and it is the reason many people know the phrase "gap risk" at all. The slippage guide covers its effect on brokers and on retail accounts.
• UK EU referendum, 23 to 24 June 2016. Results came in overnight, during the Asian session. Sterling fell sharply as the outcome became clear, and GBP/USD traded at its lowest level since the mid-1980s. This was not a weekend gap, but it shows how a known event with an uncertain outcome can produce moves far larger than ordinary daily ranges.
• French presidential election, first round, 23 April 2017. The vote was held on a Sunday, before the forex week opened. When trading resumed that evening, EUR/USD opened markedly higher than its Friday close; contemporary market reports put the gap at roughly 150 to 200 pips. This is a textbook weekend gap: a scheduled event with an outcome nobody could trade until the reopen.
• Yen flash move, 3 January 2019. Early in the Asian session, with Japan on holiday and liquidity thin, the yen rose very sharply within minutes. AUD/JPY was among the hardest-hit pairs, with reports describing a drop of several per cent before a large part of the move reversed. The Reserve Bank of Australia later described the episode and pointed to thin holiday trading and automatic orders being triggered. Stops were filled in a market that had briefly almost no buyers.

Notice the variety: a policy surprise on a weekday, an overnight vote count, a Sunday election, and a holiday liquidity vacuum. None of them looks like the gaps a typical backtest shows.

Weekend risk in practice

What changes between Friday and Sunday

Liquidity fades on Friday afternoon New York time as European and then American traders finish for the week. Spreads often widen in the final hour. When the market reopens on Sunday evening, the first prices come from a relatively small number of participants in the Asia-Pacific region, and spreads are typically wide until more liquidity arrives. So a position held over a weekend faces three things:

1. The risk that something happens while the market is shut.
2. Wider spreads around the close and the reopen, which can trigger stops on their own; the bid and ask guide explains why a widening spread can hit a stop on a short position even if the chart does not appear to touch it.
3. Overnight financing. Holding over the weekend usually means paying or receiving swap for the weekend days, typically charged in a triple swap midweek. The swap guide explains the timing.

Most weekends are quiet

It is worth being balanced about this. On most weekends, nothing significant happens and the Sunday open is close to the Friday close. Weekend gaps are typically small. The issue is not that every weekend is dangerous, but that the bad weekends are both unpredictable and far worse than average. A risk rule has to work for the rare weekend, because that is the one that does the damage.

Know the calendar

Some weekend risk is scheduled. Elections and referendums are announced in advance, as are some international summits and policy meetings. Checking whether any significant vote or meeting falls on the coming weekend takes a couple of minutes on an economic calendar or a news site. Unscheduled events, by definition, cannot be checked for.

Guaranteed stops

A guaranteed stop-loss order (often shortened to GSLO) is a stop that the broker commits to filling at exactly your level, even if the market gaps through it. The broker takes on the gap risk; you pay for it.

How they generally work, though details vary by broker and you should read your provider's terms:

• A premium. You pay a fee for the guarantee. Some brokers charge it only if the stop is triggered and refund it otherwise; others charge it when the order is placed. It is often expressed as a number of points or a percentage of the position value.
• A minimum distance. You usually cannot place a guaranteed stop very close to the current price. The minimum distance varies by instrument and can widen ahead of known events.
• Restrictions. Guaranteed stops may not be available on every instrument, every account type or every platform, and some brokers do not offer them at all. They often cannot be moved further from the price once set, and may only be attached at certain times.
• Not a strategy. A guaranteed stop caps the loss on that position. It does not make a bad trade a good one, and the premium is a cost that reduces results over many trades.

Worked example: is the premium worth it?

Illustrative figures only.

• Long 0.25 lots EUR/USD in a $10,000 account, stop 40 pips away. Planned risk: 40 × $2.50 = $100, or 1%.
• Suppose a broker charges a premium equivalent to 3 pips for a guaranteed stop, charged only if triggered. That is 3 × $2.50 = $7.50.
• If the stop is hit normally, you lose $100 plus $7.50.
• If the market gaps 150 pips through the stop over a weekend, an ordinary stop loses about 150 × $2.50 = $375. The guaranteed stop loses $107.50.

Whether that trade-off makes sense depends on how often you hold through weekends and events, and how much of your account a gap would cost. Treat it as an insurance decision, and price it against the alternative of simply holding a smaller position.

Sizing for gaps

The standard position-sizing method in our position sizing guide works out lots from the distance to your stop. That is correct for normal conditions. For positions held through weekends or high-risk events, add a second question: what would a plausible gap cost me?

A two-check method

1. Size the trade normally from your stop: risk ÷ (stop pips × pip value).
2. Choose a stress gap for the instrument, a move you consider plausible though unlikely over a weekend or event, and a maximum loss you would accept if it happened.
3. Calculate the size at which the stress gap would cost exactly that maximum.
4. Use whichever of the two sizes is smaller.

Worked example

All figures are illustrative.

• Account: $10,000. Normal risk: 1% = $100. Stop: 40 pips on EUR/USD.
• Normal size: $100 ÷ (40 × $10) = 0.25 lots.
• You plan to hold over a weekend with an election on the Sunday. You choose a stress gap of 200 pips and decide a gap should never cost more than 2%, or $200.
• Gap-limited size: $200 ÷ (200 × $10) = 0.10 lots.
• You trade 0.10 lots. If the stop is hit normally you lose $40, or 0.4%. If the stress gap happens you lose about $200, or 2%.

The stress gap you choose is a judgement, not a forecast. Pairs with a history of sharp moves, pairs involving currencies with active intervention risk, exotic pairs and periods with a scheduled event over the weekend warrant a larger assumption. Looking back at your platform's chart history for the largest Monday opening gaps you can find on that pair is a reasonable starting point, while remembering that the largest gap in the future can exceed the largest in the past.

Account-level checks

Gaps hit all positions at once. If you hold five dollar-related positions over a weekend, a dollar shock gaps them all together, and the currency correlation guide explains why spreading across pairs that share a currency provides little protection. Add up the stress-gap loss across all positions you hold over the weekend, not trade by trade.

Then check margin. If a stress gap would push your margin level close to the stop-out threshold, the broker may close positions at the worst prices of the move. Lower leverage gives you room; the margin calculator helps you see how much margin your positions use.

Other ways traders reduce gap risk

• Close or reduce before the weekend. The simplest option. Day traders and many short-term traders close everything on Friday as a rule. The cost is giving up trades that might have continued.
• Avoid opening new positions just before major events. Waiting until after a release or a vote removes the gap from the position's life.
• Prefer lower leverage on positions you hold for days or weeks. Longer holding periods include more weekends and more events.
• Cancel pending entry orders before the weekend so you do not enter at a gapped price with a larger stop distance than planned.
• Use guaranteed stops selectively, for positions where a gap would do real damage, rather than on everything.
• Choose a regulated broker with negative balance protection if you are a retail client. It does not reduce your loss on a gap, but it limits it to your deposit. The guide on how to check a broker licence explains how to confirm which entity you are dealing with.

Common mistakes

• Treating the stop distance as the maximum loss. It is the planned loss in normal conditions. In a gap, it can be several times larger.
• Sizing weekend positions the same as intraday ones. A position held through a weekend carries a risk the intraday position does not.
• Assuming gaps always fill. A popular idea says price tends to return to close the weekend gap. Sometimes it does; sometimes it does not, and there is no rule saying it must. It is not a basis for risk decisions.
• Forgetting other instruments. Index and share CFDs can gap every day, not just at weekends.
• Leaving pending entries in place. A buy stop that triggers on a gap enters at a worse price with a larger effective stop.
• Relying on backtests. Many backtests assume stops fill at their level. Real fills in gaps are worse, so live results can be worse than the test. The backtesting guide covers this and other gaps between tests and reality.

Gaps are one of the reasons trading leveraged products is risky for everyone, not just for beginners. Most retail CFD accounts lose money, as explained on our risk warning page, and leverage magnifies the effect of a gap on your account.

Frequently asked questions

What is a gap in forex?

A gap is a jump in price from one level to another with no trades in between. In forex it most often appears at the Sunday evening reopen, when the first price of the week differs from Friday's close, but sudden announcements can create the same effect during the week. The gap glossary entry gives a short definition.

Will my stop loss protect me over the weekend?

It will close the position, but not necessarily at your level. An ordinary stop becomes a market order when triggered, so if the market opens beyond your stop, you are filled at the opening price or worse. Only a guaranteed stop promises a fill at your exact level.

How do guaranteed stops work?

You pay a premium and the broker guarantees to close your position at exactly your stop level even if the market gaps through it. Depending on the broker, the premium may be charged when the order is placed or only if it is triggered. They usually require a minimum distance from the current price and are not offered on every instrument or by every broker.

Should I close all my trades before the weekend?

That depends on your approach and holding period. Many short-term traders do close everything on Friday, while position traders accept weekend risk as part of holding for weeks. What matters is that positions held over a weekend are sized so that a plausible gap would not cause unacceptable damage to the account.

Can a gap make me lose more than my account balance?

A large enough gap can push an account's equity below zero before the broker closes positions. Retail clients of EU- and UK-regulated brokers have negative balance protection, which limits losses to the funds in the account. Professional clients and clients of some offshore entities may not have this protection.

Do weekend gaps always get filled?

No. Price sometimes moves back to Friday's closing level, and sometimes it keeps going and never returns. There is no reliable rule, so a gap fill should not be part of a risk plan.