Weekend gaps

D

Dr Who

There's a thread on one of the other forums regarding the statistical tradeability of weekend gaps.

Now I'm one for trading stats as I already trade pairs successfully but before I try my hand at a new idea I like to understand the logic behind it.

It would be nice to hear from some FX pros about why they think these weekend gaps sometimes do and sometimes dont appear .
Naturally weekend news will have an influence but in the mechanics of the market itself who are the guys with the big balls who actually post up the very first prices ?
 
I think currencies gap for the same reason stocks gap, news released after market is closed or a imbalance of one way orders at the open, most retail brokers open around 5pm EST sunday night, and yes gaps are very playable, I've traded them manually for several months with success, i usually stick to the majors and filter for minimum 20 pip gaps, and exit within 1 or 2 hours sometimes a little longer depending on price action/news, i have considered using this
<a target="_new" href="http://www.plimus.com/jsp/redirect.jsp?contractId=2882066&referrer=fxsoftware">gap system</a> which a couple of guys on another forum i won't mention have said good things about, but im kinda old school with my manual trading, ive never auto-traded before, if anyone has tryed this automated system id be interested in hearing your comments.
 
You dont need to buy a robot like this because FF forum has a couple on there for free. And some guys have done backtests for a couple of years and the possibilities look good. Numbers are inevitably small however as you only get 52 weekends a year.
 
being on the West Coast, Sundays are an extra trading day for me and gaps often a
very good - sometimes 'no brainer' trade

to some extent there's a clue to what may go on from the Friday close, but the over-
all price direction, formation/s are in play too, and while news/economic reports are
predictable, unknowable events such as the capture of Saddam on the weekend are
not able to be included in pre-opening analysis

ime gaps are often, but not always, closed - I only trade the eurusd so only speak to
that pair. sometimes the closing begins after the opening, sometimes not for many
hours afterwards; gaps may be speculated on with various fibo, S/R and channel etc
lines, culmination of various patterns, tops/bottoms, tho gaps don't appear often

a significant matter is the trading that may be occurring prior to the Sun/Mon open
which for most of the world is 3pm PST, 6pm EST, 11pm CT etc
however Oanda has 24/365 trading available and trades often appear around 10am
PST on Sunday, and during the first Greek financing announcement made on Sunday
May 7 , trades were going thru at 10am Saturday
the Fri close was 1.2750 and Sun/Mon opening at 1.2923 - gap up of 173 pips, the price
rallied to 1.3093 and didn't close the gap until the end of the session

trend lines drawn from various gap points sometimes appear to be reacted with by
future prices, but it's not that useful a technique in the long term

Oanda's FXGame is their realtime demo account and imo - I have an account with
Oanda - is worth using prior to the Sun/Mon opening to see what fx prices are doing
 
Oanda will let you trade 24/7, just watch the spread.
I shorted the AUS/USD when China raised their rate on Christmas. Accurate fill and execution, but the gap closure stopped me on the following open. Outsmarted myself again!
 
Wallace: i dont think you can draw any conclusions from Oandas weekend pricing. They are completly on their own during this time. I also think its a really bad idea, they are taking a huge risk with that. Surely they lost quite a bit of money in 2008, i know i made a bit on their weekend market back then. Recently they have higher spreads sometimes during the weekend than the static 10 pip wide quotes from 2008.

Olsen is an academic, and has a strong opinion on how fx markets should work and how current mechancis are flawed. He implements his ideas in oanda with a certain stubbornness, even tho it may not always benefit the firm. In every interview he goes on about how there should be a 24/7 market, instantious settlement and realtime interest payments. In all 3 cases, Oanda assumes unnecessary risks. I guess he is basically right, with todays computing power current fx-conventions (tom/next settlement with downtime for daily rolls and weekend) appears unnecessary.

Their weekend-quotes are probably just a function of their inventory they carry over the weekend, the probability of a gap(probably adjusted if there are makro news over the w/e) and clients weekend-orders. If an order neutralizes inventory, do nothing, if inventory exceeds a treshold, move the quote accordingly. Something along this line i guess.
 
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