What is gap trading?
Gap trading refers to opening or holding positions that profit from sudden price jumps, known as gaps. A gap occurs when the next available price is significantly higher or lower than the last traded price, without passing through the intervening levels.
While price gaps can happen unpredictably, they also happen at predictable times, such as at market open or during red folder news. Some traders target these opportunities, exploiting the simulated trading model.
⚠️ This rule is a soft breach. You will not be disqualified for encountering a price gap.
ℹ️ This rule applies to challenge and funded accounts.
What is a price gap?
A price gap occurs when the market moves from one price level to another without trading through the prices in between.
In trading platforms, this often looks like a sudden jump or drop in the chart, where candles don’t connect smoothly, and there's a visible gap between the closing price of one period and the opening price of the next.
The image below shows the gold price jumping from $3,388.48 to $3,392.94, representing a 0.13% gap.
This can happen:
At the opening of a new session (e.g. after a weekend or daily close);
During high volatility, when the price skips levels due to a lack of liquidity;
After unexpected news or headlines;
At any time, not just during scheduled events.
The gap rule
If your position profits from a gap that is larger than 0.2%, we’ll deduct the profit. We do not deduct profit earned before or after the gap.
Example #1: Weekend gap
Suppose the following:
On Friday morning, you bought 1 lot of XAU/USD at $3,495;
On Friday, the market closed at $3,500;
At market close, you have $500 unrealised gains;
On Monday, the market reopened at $3,517.50, representing a 0.5% gap;
You close the position at $3,520.
Here is how the situation will be handled:
The gain before the gap is preserved: The price difference ($5) between the opening price of your position on Friday morning ($3,495) and the market close on Friday night ($3,500) remains unaffected by this policy. These profits were gained before the gap.
The gain from the gap is deducted: The profit from the 0.5% gap between the market close on Friday and the market open on Monday will be voided, and a deduction of $1,750 will be made.
The gain after the gap is kept: The price difference ($2.50) between the market open ($3,517.50) and your closing price ($3,520) is exempt from this policy.
The outcome: The profit would be $750 ($500 from before the gap and $250 from after the gap).
To summarise, the trader keeps the profit before the gap. However, anything gained from the gap will be deducted.
Example #2: Intraday gap
Suppose the following:
At 09:00 on Monday morning, you bought 1 BTC/USD at $95,000 with a stop loss at $95,500;
At 10:00, the price has gradually risen to $95,200;
Shortly after, a sudden gap occurs, and the price jumps from $95,200 to $96,000, representing a 0.84% gap;
Your take profit has been triggered, and the position is now closed with $1,000 profit.
Here is how the situation will be handled:
The gain before the gap is preserved: The price difference ($200) between the position opening price ($95,000) on Monday morning and the price before the gap ($95,200) remains unaffected by this policy. These profits were gained before the gap.
The gain from the gap is deducted: The profit from the 0.84% gap between $95,200 price level and the closing price ($96,000) will be voided, and a deduction of $800 will be made.
The outcome: The final profit will be $200.
To summarise, the trader keeps the profit before the gap. However, anything gained from the gap will be deducted.
Summary
This policy protects the company from potentially unlimited losses in a simulated trading environment. You have a 0.2% allowance to benefit from price gaps. However, any advantage gained from gaps larger than 0.2% will be deducted.
FAQ
Does this rule protect the trader if the gap causes a loss?
No. This rule is not applied in both directions. If a gap causes a loss on your trade, it still counts as a valid outcome. The reason is that the risk profile between the trader and the firm is not the same:
As a trader, you can take various actions to manage risk, such as avoiding new trading, holding positions overnight or on weekends.
As a trader, your risk is limited to the price you paid for your challenge.
As a prop firm, we have potentially unlimited exposure to risks, even though trades are executed in a simulated environment.
This means that one-sided gap gains can put the firm at significant risk, while trader losses are already capped. To keep the program sustainable and fair, we apply this rule only to limit unfair profit outcomes, not to protect against losses.
Does this rule apply to Challenge accounts?
Yes. The gap trading policy applies to both Challenge and Funded accounts. Any trades that benefit from gaps larger than 0.2%—whether during a Challenge or after funding—may have profits adjusted or removed.