Sunday open: wide spreads and the gap that may or may not close

[Shadow Trader]

The first minutes of the weekly open are unlike any other time in the market. Liquidity is thin, quotes are sparse, and spreads can be several times the normal level.

Gaps between Friday's close and Sunday's open are common after weekend news. The popular belief is that gaps always fill, but in FX the picture is messier. Retail brokers' charts may show a gap that interbank prices smoothed out over the first few minutes, and the point at which trading becomes reliable is not the first tick.

Scalpers who try to trade the gap on the very first quotes face execution risk that is far larger than the potential move. Spreads, slippage, and rejected orders can erase the edge before it starts.

A more practical approach is to observe the first thirty to sixty minutes, watch how spreads normalise, and only then judge whether a gap trade has any reasonable cost structure.

It is also worth separating the gap itself from the first reaction to it. Many gaps are partly filled within the first hour simply because the opening quotes were thin and skewed, not because of any deeper force pulling price back. Others stay open for days because the news behind them was real. The difference is usually visible in the size of the gap relative to the typical daily range and in whether the news that caused it is still developing.

A simple log of every Sunday gap on a favourite pair, with its size, the time taken to fill, and the news background, builds a personal base rate. After a few months, it becomes clear which gaps are worth any attention at all, and the answer is often only the largest few. That alone removes a great deal of marginal trading at the worst-liquidity moment of the week.

How long after the weekly open do you wait before spreads feel tradable on your main pairs?