Gaps: why a stop does not always save you
What a price gap between candles is, why a stop-loss closes a trade worse than its level in a gap, and how to protect yourself.
A gap is a break between the close of one candle and the open of the next. It happens when the market is closed (weekends, holidays) or after sharp news: there simply were no trades at the prices in between.
A stop-loss is an order to close the position at market as soon as the price touches the level. If the price opened already beyond the stop, the first available price is the opening price, and the loss is bigger than planned. A take-profit is a limit order: in a gap in your favour it executes at its price or better.
A real example: the Nasdaq 100 closed at 17,382 on Friday, 4 April 2025, and after the weekend opened at 16,537 — 4.9% lower (HistData.com data; this is the week the US announced new tariffs). A long with a stop 1% below the close would have closed with a 4.9% loss, that is almost −5R instead of −1R.
How to protect yourself: risk a small share of the account per trade, so that even a gap does not wreck it; close or reduce the position before weekends and important events. Cryptocurrencies trade around the clock, and there are almost no big gaps there; currencies, gold and indices close for the weekend.
In Market Replay, the “FX & metals” mode has a “Close before the weekend” checkbox, and after a trade the weekends are marked on the chart.