Weekend gaps: why your stop loss filled way worse on Monday

A question new traders ask a lot: "I had a stop loss in, so why did I lose double over the weekend?" The answer is almost always a weekend gap.

Why gaps happen

FX closes Friday at 5pm New York time and reopens Sunday at 5pm New York time. The world doesn't stop in between: elections, geopolitics, central bank comments, policy announcements. When the market reopens, price doesn't continue from Friday's close. It opens straight at the new level, and the difference is the gap.

Why the stop loss didn't save you

A stop loss becomes a market order once price reaches it, and it fills at the next available price. If price jumps over your level without ever trading there, you get filled at the opening price, not the price you typed.

Example: long gold at 3,900 with 0.10 lot, stop at 3,880. Planned risk: $200. Monday opens at 3,860. Stop fills at 3,860 and the loss is $400, double the plan. Same on FX: 1 lot EURUSD with a 50 pip stop is $500 risk. A 30 pip gap through it makes it $800.

What to do before Friday's close

Ask whether the trade really needs to be open over the weekend. If not, close it or take part off.

If you hold, size it so that a gap of twice your stop distance is still an acceptable loss.

Check margin level. A gap can push a stretched account straight to stop out with no chance to react.

Look at what's scheduled over the weekend. Elections and political events are when the biggest gaps tend to show up.

Gaps can work for you too. A take profit that gets jumped fills at the better price.

Bottom line

A stop loss decides where you want out. It doesn't guarantee the price. Sensible size, or not holding trades you have no reason to hold, is the only real protection.

How do you handle open positions into the weekend? Close everything Friday, or size down and hold?

Good explanation. One addition for anyone running an EA: many have a Friday close-time input, and setting it to close positions an hour or two before the weekend close (in broker server time, not your local time) removes the gap risk completely for strategies that don't need to hold over the weekend.