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Do You Close Your Trades Before the Weekends?

October 1, 2018 by

A weekend gap is the difference between the Friday close rate and the Monday open rate. It is an important concept in Forex trading. There are many different ways to incorporate weekend gaps in your trading system. There is a classic strategy of gap filling, and there is a rather bold idea of predicting the gaps. Yet, the primary question regarding the gaps occurring in currency charts is whether to close a trade before a weekend or to keep it open?

Exposing your trade to what could happen during Saturday and Sunday gives the following two advantages:

  • You do not miss a movement in a favorable direction. A sizable gap might form a hefty share of a trade’s profit. You might object that the gap movement might be in an adverse direction, but then why have you opened that trade in the first place if you had not expected expected it to move in your favor?
  • You do not lose money on extra spread for reopening the trade on Monday. While the negative impact of the weekend gap is always unpredictable, closing the trade on Friday and opening it again at the start of a new trading week is a sure way to pay double on your broker’s spread and commission.

The two advantages of closing the trade are the following:

  • You stay protected against extreme adverse movements. The gap may be hundreds of pips worth and, in the worst case, might put your account’s balance into negative territory as the stop-loss order will certainly slip.
  • Keeping the strategy consistent. If your trading system is based on short-term trades, a position that did not end on Friday probably will not represent the system’s principles as it will last more than 48 hours instead of few hours or minutes it was planned for.

The following example chart and further discussion will help us to understand what is the best way of dealing with weekends in Forex:

Do You Close Your Trades Before the Weekends?

The weekend gap of 37.9 pips on EUR/USD between August 10 and August 13 (the chart is GMT+3) could be rather costly if you had a long trade on Friday and would bring you some additional profit had you been short that currency pair. And if you look at it the gap in a wider context (click on the image above), you can see that the gap, despite its size, would not matter much for a long-term position.

One of the important things to look at when deciding whether to close the trade for the weekend is how close the current exchange rate is to your stop-loss and take-profit levels.

If you are deep in the profit, just a few pips away from the TP, it might probably be a good idea to keep it running. At worst, your trade would be set back some amount of pips when the market opens. At best, you will get a nice positive slippage on your take-profit order.

If the trade has already lost a lot and is nearing its stop-loss, keeping it up through the weekend’s uncertainty would not be wise. At best, you would get it to recover somewhat. At worst, you will be hit with a stop-loss slippage, resulting in a bigger-than-expected loss.

My own trading is mostly long-term with trades spanning days, weeks, and sometimes even months — this lets me ignore the weekend question almost completely. My important news trading strategy is extremely short-term in nature with trades never lasting more than one hour. Of course, I would never let such a trade to stay active through the weekend because it would go totally against the strategy’s rules. Had I also traded some medium-term strategy, I would probably employ the tactics described above and decide the fate of the particular trade depending on its profit status. And how about you?

Do you close positions before the weekend or do you keep them open over the weekend?

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If you want to share your experience of leaving Forex trades open over the weekend, feel free to comment using the form below.

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