CFD Market Opens and Closes: Gaps, Spreads, and Execution Risk
Summary
The guide explains why CFD prices and execution conditions can change around market sessions. At the open, news accumulated during a closure can produce a gap, while concentrated orders and incomplete liquidity can increase short-term volatility and widen spreads. Near the close, traders may reduce positions, depth can shift, and spreads may widen. Holding some CFDs overnight can also incur financing or funding costs.
It connects these conditions to practical risks: slippage, stop-loss orders filled beyond their trigger after a gap, and greater account exposure when leverage is used. An example follows a long position with an entry at 100 and a stop at 95; if negative news causes the market to reopen at 90, execution may occur near the available price rather than the stop level. Suggested precautions include checking news and product costs, avoiding impulsive opening trades, reducing position size, and using limit orders where appropriate. These controls can help manage risk but cannot remove gap or slippage exposure; the guide gives no measured estimates of how often these conditions occur.
Key ideas
- News released while a market is closed can cause the next opening price to gap away from the prior close.
- Liquidity and spreads can vary near session opens and closes, affecting execution costs.
- A stop-loss may execute beyond its trigger when prices gap through that level.
- Leverage can magnify the effect of short-term volatility on account equity.
- Checking news, overnight costs, and position size can help manage session-related risk, but cannot eliminate it.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.