forex-scalping.com

On a chart, each bar seems to start exactly where the previous one ended. In forex, that's mostly true, but not always.

The open of a bar is the first tick in that minute. The close of the previous bar is the last tick of the earlier minute. If the market moved between those ticks, there's a small gap. On a fast market, with a pause between ticks, the gap can be a few points.

Some platforms force the open to equal the previous close, hiding the gap. Others show it honestly.

For tests with tight stops, the gap matters. A stop sitting between the last tick and the next one is skipped. On a chart with forced continuity, it would appear to have been touched exactly.

It also affects indicators that rely on the previous close and the next open, such as gap-based signals. On forex charts, these signals appear rarely, but at the open of a session, when the quote stream restarts, they show up.

Checking whether the platform's data has true opens or adjusted ones takes a minute: look at a quiet time and see if any bars open at a different price from the last close.

Do bars on your platform open at the previous close, or show real small gaps?

Mine shows real gaps, and I only went looking after a backtest disagreed with what happened to me live. I had a stop on EURUSD that the test said was touched exactly, while my actual fill was nearly two points worse. When I zoomed in on the minute bars, the next bar had opened slightly beyond my stop, so there was never a tick at my level.

The easiest place to see it is the session restart on Monday morning and the minute after rollover. At those times I regularly see opens that sit a few points away from the prior close. During the busy part of London the gaps are tiny and rare, which is probably why most people never notice them.

What I changed was my tester. It now fills stops at the worse of the stop level and the next bar's open rather than assuming the exact price. That made the results a little uglier, but they line up with my real statements far better than before.