Gaps, the weekend and the daily break
Lesson 17 · about 9 min
A stop-loss protects you only while the market is open. Futures are closed for one hour every weekday and for 49 hours every weekend, and whatever happens in the world during those hours is priced in a single step at the reopen. Your stop fills there, not at your level. This lesson puts numbers on that and derives a rule for what you can hold through a closure.
Where the closures are
| Closure | Duration | What can happen |
|---|---|---|
| Daily break, 5:00 to 6:00 pm ET | 1 hour | Earnings after 4:00 pm are digested; occasional geopolitical headlines |
| Weekend, Friday 5:00 pm to Sunday 6:00 pm ET | 49 hours | Anything: elections, wars, central bank action, bank failures, weekend policy announcements |
| Holidays | 1 to 3 days | Same as weekend, sometimes with foreign markets open and moving |
Most weekends the Sunday open is within a few points of Friday's close. Several times a decade it is not: the index futures have opened Sunday evening 3% to 7% from Friday's settlement, sometimes at the exchange's overnight limit (Lesson 2), which means the market did not even open at a tradable price for a while.
What a gap costs per contract
Take a 3% adverse gap, which is a bad but not historic weekend.
| Contract | Level (illustrative) | 3% in points | Loss per contract | Compare: a normal 8-point stop |
|---|---|---|---|---|
| ES | 5,000 | 150 | $7,500 | $400 |
| MES | 5,000 | 150 | $750 | $40 |
| NQ | 18,000 | 540 | $10,800 | $160 (8 pt) |
| MNQ | 18,000 | 540 | $1,080 | $16 |
| CL | 78.00 | 2.34 | $2,340 | $300 ($0.30) |
| MCL | 78.00 | 2.34 | $234 | $30 |
The last two columns are the point. A trader who has sized 5 MES for a $200 risk on an 8-point stop has $3,750 of exposure to a 3% weekend gap, nearly nineteen times the planned risk. On a $10,000 account that is 37.5%. The stop did nothing; it triggered at the reopen and filled 150 points lower.
The rule that follows
Because the stop distance is irrelevant over a closure, the only thing that bounds the loss is account leverage (Module 3, Lesson 2). Decide on the largest gap you are willing to be exposed to and the largest percentage of the account you are willing to lose to it, then:
max account leverage overnight = max acceptable loss % ÷ assumed gap %
If you will accept losing 5% of the account to a 3% gap, max overnight account leverage is 5 ÷ 3 ≈ 1.7×. On a $10,000 account that is $17,000 of notional, less than one MES at 5,000 when the index is high, or about seven MCL at $78. If you want to be sure of surviving a 7% limit-down open with a 10% loss, the number is 10 ÷ 7 ≈ 1.4×.
| Account | Max loss to a 3% gap | Max overnight notional | MES at 5,000 | MCL at 78 |
|---|---|---|---|---|
| $5,000 | 5% ($250) | $8,333 | 0 | 1 |
| $10,000 | 5% ($500) | $16,667 | 0 | 2 |
| $25,000 | 5% ($1,250) | $41,667 | 1 | 5 |
| $50,000 | 5% ($2,500) | $83,333 | 3 | 10 |
The zeros are honest. A $10,000 account cannot hold one MES over a weekend within a 5%-loss-to-a-3%-gap rule. It can day trade several. That is the difference between intraday and overnight sizing, and it is why the risk course keeps them separate.
Key idea: Over a closure, your stop is a market order at the reopen. The loss is bounded by account leverage, not by stop distance. Set overnight leverage from the gap you are willing to absorb, and expect the answer to be much smaller than your intraday size.
The daily break is not free either
The 5:00 to 6:00 pm ET break is short, but it sits right after the US close, when the largest companies report earnings. NQ can reopen at 6:00 pm 1% or more from the 5:00 pm close on a single mega-cap report. If you hold NQ or MNQ through the break on an earnings day, you are holding through an event, and the sizing should reflect it.
The break also matters administratively. Positions open across it are overnight positions in the broker's eyes and must meet full initial margin from the cut-off (Module 3). A trader who intends to "hold for another hour" through 5:00 pm has changed their margin category, their gap exposure and their liquidation risk without changing anything on the chart.
Practical rules
- Be flat before scheduled binary events you cannot size for: major central bank decisions, elections, referenda.
- Cap overnight account leverage at a level derived from a gap you have chosen in advance; write it in the risk plan.
- Do not rely on GTC stops over closures. They work as intended (they trigger at the reopen) but they do not limit the loss.
- Know what is scheduled for the weekend in the same way you know the weekday release calendar.
- Treat the Sunday open as the thinnest and most gap-prone moment of the week and avoid new entries in the first minutes.
Try it: Pick a gap you are willing to absorb (2%, 3% or 5%) and a maximum loss from it (say 5% of the account). Compute your max overnight account leverage and translate it into contracts of the one product you trade at today's price. Then look back over the last two years of Sunday opens on that product and count how many gapped more than your chosen percentage.
Recap
- Futures are closed one hour every weekday and 49 hours every weekend; stops trigger at the reopen, wherever that is.
- A 3% gap costs $750 per MES and $7,500 per ES at a 5,000 index level, regardless of your stop.
- max overnight account leverage = acceptable loss % ÷ assumed gap %; for 5% and 3% that is about 1.7×.
- Small accounts often cannot hold even one micro overnight inside a sensible gap rule; day trading them is fine.
- The daily break follows the earnings window; positions across it become overnight positions for margin.
See it drawn
Original diagrams for the ideas on this page. Illustrative, not real market data.