How You Can Trade Opening Week Gaps

How You Can Trade Opening Week Gaps

An opening week gap in trading occurs when the first price quoted in a new trading week differs significantly from the closing price of an instrument in the prior week.

A gap can occur for various reasons, most commonly due to economic or geopolitical news or sometimes just a headline that takes place over a weekend, when markets are closed for trading.

An example is one that just took place over the February 8-9 weekend that led to gaps in opening prices when forex markets opened for the new trading week.

Opening Week Gaps

US President Trump said they will be announcing on Monday 25% tariffs on all steel and aluminum coming into the US and he will announce reciprocal tariffs on Tuesday or Wednesday which will go into effect almost immediately (Source: Newsquawk.com)

Not an exact science

Identifying the actual closing price from a prior week and the opening price in the new week is not an exact science.

In the forex market, 5PM NY time is considered to be the daily closing price. While all forex price feeds should have similar prices (differences being in the bid-offered spread), there are often disparities at the closing of s day, especially on a Friday when some brokers show wider spreads,

For example, on February 7, 2025, I saw EURUSD closes from the week ranging from 1.0327-28 to 1.0321-35.

So, when trying to identify a closing price for a gap, don’t look for an exact price as there isn’t one and give it a little leeway.

Similarly, when the new week opens spreads are generally wide and then narrow over the next hour(s) as liquidity builds. This raises a question when to start the day in determining whether there is an opening gap.

Opening Week Gaps

In this regard, I use 5PM NY time on Sunday. Others may try to use 00:00 GMT, which is 7PM or 8PM NY time depending on whether it is EST or EDT. I  suggest using 5PM to start the range for the week as this is what is most commonly used.

Determining what closing price to use for stocks is more complicated. Do you use the closing cash index price? Do you use a CFD price which can see differences in not only what symbol is being quoted (e.g. US500 or SPX500) but differences between brokers using the same symbol ,

For this reason I prefer to focus on opening week gaps in the forex market.

How to trade an opening week gap?

Gaps can be used as a clue to market sentiment and to forecast future price moves. .

One way is to use a gap as a directional indicator as long as it stays unfilled. In other words, if a gap to the downside stays open it is a bearish sign and vice versa for an upside gap

On the oither hand, others may anticipate the gap will eventually close and employ a strategy accordingly.

In this regard, one of our long time and highly respective Global-View members follows a  strategy based on the premise that opening week gaps will eventually get filled as indicated in one of his posts on the Forex Forum.

Most of the time opening GAPs, especially reaction to something political, are some of the easiest pips you ll ever juice playing the GAP to close.

EURUSD closed its opening week gap

USDCAD opening week gapo remains unfilled

To sum up, while opening week gaps are considered rare, there have been several already this year. How to trade them is a personal preference. However, gaining an understanding of opening week gaps allows traders to put the initial volatility in perspective and take advantage of potential trading opportunities offered by them.