Gap Risk

Risk Management

The risk that price opens sharply away from its previous close, jumping past a stop-loss rather than trading through it.

Gap risk is the risk that price opens the next session significantly away from where it closed, jumping straight past any stop-loss level rather than trading through it — most commonly seen over the weekend or around major surprise news. Because a gap can't be traded through, a stop-loss can fill far worse than set, exposing the position to a loss beyond the intended risk. Gap risk is highest for positions held over the weekend or into a scheduled high-impact event, which is why many traders reduce size or close out entirely ahead of both.

Related terms

Black Swan Event Slippage Stop-Loss

More in Risk Management

Aggregate Currency Exposure Analysis Paralysis Anchoring Bias ATR-Based Position Sizing Black Swan Event Calmar Ratio Confirmation Bias Correlation Hedging Cross Hedge Daily Loss Limit Decision Fatigue Drawdown

After Gap Risk

GuideHow to Measure Risk Across All Your Open PositionsRisk per trade only describes one ticket. How to add up what your stops are worth, split the book into currencies, and read the margin figures the platform is already showing you.

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