Weekend Gap Strategies
- Remember weekend Gaps are unpredictable and do not happen every weekend
- To stand the best chance of success it is best to trade them very weekend
- It is best to try to trade as many currencies as you can every weekend
- If you have to limit your currencies eliminate the ones with the lowest liquidity and highest spreads.
- Select a risk management approach that takes your account size into account. Calculate what you stand to lose if all your deals go bad and make sure you a comfortable with that number.
- Be patient - there are currencies that only have 5 to 10 trade-able weekend gaps in 1 year
- This is a market behavior trade using no indicators and which has a very high success rate - do not over manage the trades (use trailing stops or try to refine the entries excessively)
Most asked questions:
- Is there a way to know which pairs to trade?
- Is there a way to know what the maximum spread should be?
- A way to know what size the minimum gap should be?
- What roll does currency volatility play?
- Your decision of which currencies revolves around the question of: "How much are you prepared to lose?" Trading 20 currencies and risking 3% of your account per currency could mean that you could lose 60% of your account on a Monday. So make that decision first. Adjust the number of currencies traded and the risk per currency. Then select your currencies starting with the majors with highest liquidity and lower spreads and then only move into the exotics with lower liquidity and higher spreads. Take current market activities into account when selecting currencies - e.g. bank holidays
- Why not just use use your trading common sense. Just ask yourself "What is the maximum spread I am prepared to pay to enter a deal?" and enter that number. For guidance click here to see the spreads of 60 brokers> 60 broker spreads
- The Gap size is also common sense. The smaller the gap size the more trades will be taken (with possibly a lower success rate) and the bigger the gap size the fewer trades will be taken (with the possibly of a higher success rate). You need to make that decision - it is a balance of success rate and profitability. Obviously the Gap size should provide for a reasonable stop (no less than 10 pips) when taking the spread into account. The spread could reduce the effectiveness of your stop size especially if your stop is a buy transaction.
- Volatility can play a roll in setting the minimum gap size. The bigger the volatility the bigger the minimum gap size. So if the lowest volatility gap size is say 12 the all the higher ones could be in proportion higher based on their volatility. Example: - So if the volatility of the EURUSD is 100 and its minimum gap size is 10 plus the spread then if the the GBPJPY has a volatility of 200 then the minimum Gap size should be 20 plus the spread. That is one way of using volatility is a common-sense type of way
Gap size = setting for the MinimumGapSize_Pips input
These Optimization settings and information was obtained by testing the Weekend EA for 1 year prior to its launch at the end of July 2015. They are guides to help you with your setting when trading the Weekend Gap EA. In general JPY based currencies require smaller take profit %'s than the non JPY crosses.
NOTE THE SUCCESS RATES !!
The EA Input Settings
This EA has very straight forward input settings:
MinimumGapSize_Pips: The EA will not open trades if the Gap is smaller than this input. Do not have a Minimum Gap size that is smaller than twice your Maximum Spread.
MaxSpread_Pips: The EA will not open trades if the spreads are above the amount specified. It will however continue checking until the spread has normalized and the minimum Gap is still valid
TakeProfit_PercentOfActualGap: The size of the take profit is a % of the actual Gap at the time of entering the transaction
InitialStopLoss_PercentOfActualGap: The size of the stop loss is a % of the actual Gap at the time of the transaction
Trialing stop settings as shown - it is recommended that the trialing stop is no used. The Trialing stop settings are all related to the size of the GAP
When is doubt use the default settings above !!
- The default settings are sensible settings for most currencies. They are not optimized.
- The EA does no require a specific time frame. Choose a timeframe that will allow you to view the transactions eg. 5 minutes
- When using the default settings make sure that the min gap size is doubled for currencies with a maximum spread of over 4 pips.
Account balance is the balance in your account
Equity is the Balance of your account after taking open deals into account
Margin is the balance of your account after taking open deals and margin requirements into account.
If you are unsure of which method to use use the Free Margin method as it has the lowest risk and is likely to allow you to trade more currencies.
Risk Management Settings
There are 4 alternative risk management settings
The Percent of Account Free Margin: The stop will limited to a percentage of the account's free margin at the time of the transaction.
The Percent of Account Equity: The stop will limited to a percentage of the account's Equity at the time of the transaction.
The Percent of Account Balance: The stop will limited to a percentage of the account's Balance at the time of the transaction.
The above 3 settings will provide smaller risk when there are large Gaps and bigger risk when there are small Gaps. All losses will be a % of equity or Account Margin or Account Balance
Manual Lot Size: You can set the lot sizing to be fixed irrespective of the Gap size. This will cause high risk when there are large Gaps and small risk when there are smaller Gaps
If you are experienced at optimization we suggest starting with the settings below for your optimization runs which could be run on a simultaneous basis (990 options) or on an individual input basis using the rule of 4. Please note we do not offer support in optimization testing but you can start a discussion in the Forum on optimization testing