8.60 Strategy 60: The Weekend Gap Fill

The forex market operates 24/5, closing on Friday evening and reopening on Sunday evening (or Monday morning, depending on your time zone). Over the weekend, geopolitical events, news, or economic data can shift underlying valuations while retail trading is frozen.

When the market reopens on Sunday, this sudden influx of new information causes the price to 'gap' up or down from Friday's closing price. The Weekend Gap Fill strategy capitalizes on the market's high-probability tendency to retrace and 'fill' that empty space before continuing its true fundamental direction.

A gap acts as a vacuum. If the market gaps UP on Sunday by 40 pipspips: Percentage in Point. The smallest price move that a given exchange rate makes based on market convention (typically the fourth decimal place)., there is a literal void of 40 pips on the chart where no trading occurred. Market makers and institutional algorithms often drive the price back down to Friday's closing price to clear out liquidityliquidity: The degree to which a currency can be quickly bought or sold in the market without affecting its price. High liquidity means tight spreads and smooth execution. and rebalance the books before the week officially gets underway.

1. Identify the Gap: Wait for the market to open on Sunday. Ensure the gap is significant (usually at least 15-20 pipspips: Percentage in Point. The smallest price move that a given exchange rate makes based on market convention (typically the fourth decimal place). on major pairs). If the gap is only 3 pips, it's noise, ignore it.
2. Confirm Exhaustion: Do not enter immediately on the open. Wait for the first 15-minute or 1-hour candle to show signs of exhaustion (a pin bar or doji) in the direction of the gap.
3. Enter the Trade: If it gapped UP, you sell. If it gapped DOWN, you buy. Your entry is when price begins reversing back towards Friday's close.
4. Stop LossStop Loss: An automated order placed with a broker to buy or sell once the price reaches a specified level, designed to limit your loss on a position.: Place your stop loss above the absolute high of the Sunday opening spike (for a gap up) or below the low (for a gap down).
5. Take ProfitTake Profit: An automated order to close a trade at a specific price to lock in a profit.: Your exact take profit is Friday's closing price. The moment the gap is mathematically filled, you exit the trade.