Do you keep open positions over the weekend?

It is well known that short-term transactions dominate the currency market, especially among retail investors. There is nothing strange about it, since trading lasts 24 hours a day, 5 days a week. One trading day on FX is therefore the equivalent of three sessions in the stock market. Thus, we have theoretically three times more time to conclude transactions. Naturally, our investment time horizon tends to decrease, not increase. However, even if we trade only in the short term (day-trading or swing trading), there are situations where even a position opened on Friday does not bring any resolution and we wonder what to do with it - wait or close it before the weekend. How does rolling in Forex work?

Weekend gaps

There are certain risks associated with holding positions over the weekend. The largest of them is the price gap at the opening on Sunday, commonly known as the weekend gap. On weekends Forex brokers freeze trade and the ability to place and modify orders. This does not mean, however, that nobody concludes transactions on the interbank market. As a consequence, even despite lower liquidity, there is a situation where the market opening rate on Sunday evening deviates from the market closing rate on Friday.

Usually, these differences are not very large, unless there are specific reasons for it, but there are exceptions (e.g. the specter of Greek bankruptcy). If we use leverage on our investment account to a large extent (i.e. we open positions with a large volume in relation to the deposit held) and hold it for the weekend during an uncertain market situation, we may encounter a large enough weekend gap, which will not only reset our this account will still generate a substantial overdraft on it. Of course, if the gap occurs the other way, our account may record a significant profit. Such an approach, without proper analysis, is tantamount to a coin toss.

READ NECESSARY: Price gaps - types and characteristics

Extended spreads

Even if we manage to "predict" the direction of the gap or that it will be negligible, if we leave the position open and use a narrow stop loss, we may encounter an unpleasant surprise. The initial trading hours always involve larger spreads due to very low liquidity in the market. Consequently, even if there was no gap and our Stop Loss was set relatively close to the last price itself spread (or more precisely, its extension) may cause our position to be automatically closed immediately after starting trading.

In the case of the vast majority of Forex brokers, in the event of a price gap, closing the position does not take place at the rate indicated by us in the Stop Loss order, but at the first possible price. This means that our loss may be greater than we assumed when setting SL.

Stay updated

In general, no significant macroeconomic data that could affect the rate are published on weekends. However, there are exceptions. Group meetings G7 they usually take place on Saturdays. There are also other, non-cyclical but equally important events that can have a significant impact on exchange rates. Usually, key institutions announce these data in advance. Proposal? It is worth following information from the world's largest economies and taking them into account before Friday's market close.

What to do?

Analyze and calculate. If we see a potential, real threat resulting from economic information and we are not able to assess how large the gap may be, or in which direction it will appear, even in long-term trading, it is worth thinking about closing the position at the end of the trade on Friday and resuming it at the opening. We are giving up the risk of a price gap at the price of a spread or commission paid again. However, if we only want to minimize the risk, we can decide to reduce the transaction volume, e.g. by half. After the end of the trade on Friday, it will be too late, because we have no possibility to even modify the Stop Loss (which will not help us anyway) or close the trade.

It is usually better to lose an opportunity than money.