Currency market closes at 5:00 PM EST each Friday. The price at 5:00 PM EST is known as the Friday Closing Price. There is no trading on Saturday and Sunday during the weekend. The market again open at 5:00 PM EST on Sunday. Often it happens that there is a difference between the Friday Closing Price and the Monday Opening Price. This price differential is known as the Sunday Price Gap or the Weekend Price Gap and there are traders who love to trade this price gap if it is more than 20-30 pips. Sometimes this gap can be as big as 70-100 pips and even as big as 200 pips. So it is always a good idea to trade this gap when it is this much big.
You might be wondering what causes this price gap during the weekend. The most obvious answer is that during the weekend there is often some important finance meeting or some important financial decision is taken by the finance ministers of the G 7 group of countries which often tends to move the market. There can also be some breaking news during the weekend that can move the markets and cause this Sunday Price Gap. Whatever fundamental or technical news is there the market is going to factor that in when it opens on Monday Morning in Tokyo. Now in case there is a gap that is bigger than 50 pips, it is often a good idea to capitalize on it as the market most often will tend to first close that price gap.
Super Sunday System
What you need is a Sunday Gap Trading Strategy that you can use with a high degree of success. You can download this Super Sunday System that uses bullish and bearish reversal candlestick patterns to make the entry decision in the market when there is a gap. When a gap appears, it may get filled in the next 24 hours, it may take more time or it may never get filled. Just like everything else in the currency market, this thing is also not 100% certain that the gap is going to be filled. So it is always a good idea to put the odds in your favor by using a few filters that can increase the probability of your success. Using candlestick reversal patterns is one such filter.
Trading Sunday Gaps With Divergences
Another strategy that we have found to work well is to look for the divergence pattern when the market opens on Monday. If the divergence is bullish, go long and if it is bearish, go short. Now sometimes this happens that the divergence pattern is still forming when you try to jump into the market. In order to avoid such cases it is always a good practice to use trendlines as filters. If you spot a bullish divergence pattern, join the minor highs with a trendline and wait for the price to break that trendline. This will save you from getting chopped by the market when you try to get in early when the divergence pattern is not completely formed. We will write another detailed post making this Sunday Gap Trading Strategy using Divergence Patterns much more clear. For the time being you can download this Super Sunday System and practice it on the demo account first.