Gap

A gap appears on a chart as empty space between one bar's close and the next bar's open. In forex it happens most often over the weekend: the market closes on Friday evening and reopens on Sunday evening (European time), and anything that happens in between, from elections to geopolitical events, is priced in at the reopen. Gaps can also occur during the week on sudden news, especially in less liquid pairs or individual shares.

Why gaps matter

A stop-loss is an instruction to close at the next available price once a level is reached. If price gaps through your stop, there is no trading at your level, so the order fills at the first available price, which can be much worse. This is a form of slippage.

Worked example

You are long EUR/USD from 1.0900 with a stop at 1.0860, risking 40 pips. Over the weekend there is a major political shock. The market reopens at 1.0790. Your stop fills at around 1.0790, a loss of 110 pips: nearly three times what you planned. On one standard lot, that is 1,100 dollars rather than 400.

Ways traders manage gap risk

• Reduce size or close positions ahead of weekends and high-risk events.
• Use a guaranteed stop-loss, if the broker offers one, which fills at your level for a premium.
• Remember that retail clients in the EU and UK have negative balance protection, so the account cannot go below zero, but losses can still exceed plan.

See gap risk and weekend risk and slippage explained.