Understanding Weekend Gaps
What Causes Gaps?
- • Weekend news events and developments
- • Central bank announcements
- • Geopolitical events and crises
- • Economic data releases
- • Market sentiment shifts
Gap Statistics
Gap Frequency: 15-20% of weeks
Average Gap Size: 20-50 pips
Fill Rate: 70-80%
Fill Timeframe: Within 24-48 hours
Gap Definition
A gap occurs when there's a price difference between Friday's closing price and Sunday's opening price, creating a visible space on the price chart.
Upward Gap
Sunday open > Friday close (bullish sentiment)
Downward Gap
Sunday open < Friday close (bearish sentiment)
Sunday Market Open Timing
Kenya Time Advantage
Kenya's EAT timezone allows traders to monitor Sunday opens during convenient evening hours (10 PM - 12 AM).
| Market | Sunday Open (UTC) | Kenya Time (EAT) | Liquidity |
|---|---|---|---|
| Sydney (Australia) | 21:00 Sunday | 12:00 AM Monday | Low |
| Tokyo (Japan) | 23:00 Sunday | 2:00 AM Monday | Medium |
| London (UK) | 07:00 Monday | 10:00 AM Monday | High |
| New York (USA) | 12:00 Monday | 3:00 PM Monday | High |
Key Timing Notes for Kenya
- • Sydney open at midnight - challenging for most traders
- • Tokyo open at 2 AM - requires overnight monitoring
- • London open at 10 AM - perfect timing for gap analysis
- • New York open at 3 PM - ideal for gap continuation trades
Types of Weekend Gaps
1. Common Gap (70% of gaps)
Characteristics
- • Small size (5-20 pips)
- • No significant news catalyst
- • Usually fills within hours
- • Low trading volume
Trading Approach
- • Trade gap fill direction
- • Use tight stops (10-15 pips)
- • Quick profit taking
- • Low risk per trade
2. Breakaway Gap (20% of gaps)
Characteristics
- • Medium to large size (20-80 pips)
- • Significant news catalyst
- • May not fill immediately
- • Higher trading volume
Trading Approach
- • Trade in gap direction initially
- • Wait for pullback to gap level
- • Use wider stops (30-50 pips)
- • Hold for larger moves
3. Exhaustion Gap (10% of gaps)
Characteristics
- • Large size (50+ pips)
- • Occurs after strong trends
- • Often signals trend reversal
- • High volatility
Trading Approach
- • Look for reversal signals
- • Trade against gap direction
- • Use very wide stops (80+ pips)
- • Expect high volatility
Gap Trading Strategies
Strategy 1: Gap Fill Trading
Premise: Most gaps (70-80%) fill within 24-48 hours
Entry Rules
- 1. Identify gap at Sunday/Monday open
- 2. Wait for initial volatility to settle
- 3. Enter trade toward gap fill level
- 4. Use 15-30 minute timeframes
Risk Management
- • Stop loss: 20-30 pips beyond gap
- • Take profit: At gap fill level
- • Risk: 1-2% per trade
- • Time limit: Close if no fill in 48h
Strategy 2: Gap Continuation Trading
Premise: Strong gaps with news catalysts often continue in gap direction
Entry Conditions
- 1. Gap size > 30 pips
- 2. Strong fundamental catalyst
- 3. High volume at open
- 4. Price holds above/below gap level
Execution
- • Enter on pullback to gap edge
- • Stop: Below/above gap level
- • Target: 2-3x gap size
- • Trail stops as price moves
Strategy 3: Fade the Gap
Premise: Large gaps often represent overreactions and reverse quickly
Setup Criteria
- 1. Very large gap (80+ pips)
- 2. No major fundamental reason
- 3. Gap against major trend
- 4. Overbought/oversold conditions
Trade Management
- • Wait for reversal confirmation
- • Enter against gap direction
- • Wide stops (100+ pips)
- • Target gap fill + extension
Kenya-Specific Considerations
Timing Advantages
- ✓ London open at 10 AM - perfect for gap analysis
- ✓ NY open at 3 PM - ideal for continuation trades
- ✓ Weekend preparation during daylight hours
- ✓ No need for overnight gap monitoring
Challenges
- ✗ Sydney/Tokyo opens during sleep hours
- ✗ Limited access to early gap opportunities
- ✗ Weekend news monitoring required
- ✗ Broker spread widening at opens
Optimal Schedule for Kenyan Traders
Sunday Evening
- • Review weekend news
- • Analyze Friday's close levels
- • Set gap alerts
- • Prepare trading plan
Monday Morning
- • Check for overnight gaps
- • Analyze London open (10 AM)
- • Execute gap fill trades
- • Monitor early price action
Monday Afternoon
- • NY open analysis (3 PM)
- • Gap continuation trades
- • Position management
- • Week setup preparation
Gap Trading Risk Management
High-Risk Warning
Gap trading involves significant risks due to low liquidity, wide spreads, and unpredictable price movements at market opens.
Position Sizing
| Gap Size | Risk % | Position |
|---|---|---|
| Small (5-20 pips) | 1-2% | Standard |
| Medium (20-50 pips) | 0.5-1% | Reduced |
| Large (50+ pips) | 0.25-0.5% | Minimal |
Risk Factors
- ⚠ Wide spreads at market opens
- ⚠ Slippage on market orders
- ⚠ Low liquidity conditions
- ⚠ Unpredictable gap behavior
- ⚠ False gap signals
- ⚠ Weekend news surprises
Weekend Preparation Checklist
Friday Close Analysis
Weekend Monitoring
Essential Tools for Gap Trading
News Sources
- • Reuters
- • Bloomberg
- • ForexFactory
- • Central bank websites
Technical Tools
- • TradingView charts
- • MetaTrader platforms
- • Price alert systems
- • Mobile trading apps
Risk Management
- • Position size calculator
- • Stop loss orders
- • Risk-reward calculator
- • Trading journal