New Week Opening Gap (NWOG)
What is a New Week Opening Gap (NWOG)?
A New Week Opening Gap (NWOG) is a specific price action phenomenon that occurs between the closing price on Friday (4:59 PM EST) and the opening price on Sunday (6:00 PM EST) in forex markets. This gap represents a liquidity void where no trading activity took place during the weekend, creating an imbalance that often attracts price action in subsequent trading sessions.
Visual representation of New Week Opening Gap (NWOG) showing the price void between Friday close and Sunday open
In the Smart Money Concept (SMC) and Inner Circle Trader (ICT) methodologies, NWOGs are considered significant market inefficiencies that institutional traders exploit. They represent areas where price has moved without transaction volume, creating an imbalance that needs to be corrected. By understanding and identifying these gaps, retail traders can gain insight into potential price targets and high-probability trading opportunities.
The formation of NWOGs is primarily driven by weekend geopolitical events, economic news releases, or significant global developments that impact market sentiment while traditional trading markets are closed. When markets reopen, these external influences are reflected in the opening price, which may differ substantially from the previous week's closing price.
Types of New Week Opening Gaps
Bullish NWOG
A bullish NWOG forms when Sunday's opening price is higher than Friday's closing price
A Bullish NWOG occurs when the market opens higher on Sunday than its Friday close. This upward gap often indicates strong buying pressure or positive weekend developments that have shifted market sentiment in a bullish direction. Key characteristics of Bullish NWOGs include:
- Formation: Sunday's opening price is higher than Friday's closing price
- Market Implication: Potential bullish sentiment or strengthening of an existing uptrend
- Behavior as Support: When price is above the NWOG, the gap often acts as a support level
- Gap Fill Dynamics: The market may retrace to "fill the gap" by returning to Friday's closing price
- Institutional Significance: Often indicates areas where institutional traders are accumulating positions
Bullish NWOGs are particularly significant when they appear after a period of consolidation or at key support levels, potentially signaling the beginning of a new upward movement. The size of the gap also matters – larger gaps may indicate stronger institutional interest or more significant fundamental catalysts.
Bearish NWOG
A bearish NWOG forms when Sunday's opening price is lower than Friday's closing price
A Bearish NWOG occurs when the market opens lower on Sunday than its Friday close. This downward gap often indicates strong selling pressure or negative weekend developments that have shifted market sentiment in a bearish direction. Key characteristics of Bearish NWOGs include:
- Formation: Sunday's opening price is lower than Friday's closing price
- Market Implication: Potential bearish sentiment or strengthening of an existing downtrend
- Behavior as Resistance: When price is below the NWOG, the gap often acts as a resistance level
- Gap Fill Dynamics: The market may rise to "fill the gap" by returning to Friday's closing price
- Institutional Significance: Often indicates areas where institutional traders are distributing positions
Bearish NWOGs are particularly significant when they appear after a strong rally or at key resistance levels, potentially signaling a reversal or the continuation of a downtrend. The context in which these gaps appear greatly influences their predictive value and trading implications.
How to Identify and Calculate NWOG
Identifying and calculating a New Week Opening Gap involves a straightforward process of marking specific price levels and measuring the void between them. The following approach is widely used in SMC and ICT trading:
1. Identify Key Price Levels
- Mark Friday's Closing Price:
- Identify the last price at 4:59 PM EST on Friday before the market closes for the weekend
- This represents the final transacted price before the weekend trading pause
- Mark Sunday's Opening Price:
- Identify the first price at 6:00 PM EST on Sunday when the market reopens
- This represents the first transacted price after the weekend
- Calculate the Gap Size:
- The difference between these two prices constitutes the NWOG
- For example: If Friday's close is 1.2000 and Sunday's open is 1.2050, the NWOG is 50 pips upward
2. Calculate the Consequent Encroachment Level
The Consequent Encroachment (CE) is the 50% midpoint of the NWOG, which is particularly important in ICT methodology as it often serves as the most reactive level within the gap. To calculate:
- Apply Fibonacci Tool:
- Use a Fibonacci retracement tool with three levels: 0, 0.5, and 1.0
- For a bullish gap: Draw from Friday's close (0) to Sunday's open (1)
- For a bearish gap: Draw from Friday's close (0) to Sunday's open (1)
- Identify the 50% Level:
- The 0.5 Fibonacci level represents the Consequent Encroachment
- Example: For a gap between 1.2000 and 1.2050, the CE would be 1.2025
- Mark on Chart:
- Highlight this level on your chart as the most significant point within the NWOG
- Price reactions at this level often provide the strongest trading signals
It's recommended to track multiple NWOGs (at least the most recent four) on your charts, as they create a network of significant price levels that can influence future price action. These levels often remain relevant for extended periods, acting as key support and resistance zones until they are fully mitigated.
Trading Strategies for New Week Opening Gaps
Trading New Week Opening Gaps effectively requires a strategic approach that considers market context, price position relative to the gap, and confirmation signals. Here are comprehensive strategies for trading NWOGs:
1. Trading Bullish Bias with NWOG
When your market bias is bullish, there are two primary scenarios to consider when trading NWOGs:
Scenario 1: Price Above NWOG
- Wait for Retracement: When price is trading above the NWOG, wait for it to retrace back to the gap
- Look for Bullish Confirmation: Watch for reversal signals such as bullish candlestick patterns or a Market Structure Shift in lower timeframes (15-minute or 5-minute charts)
- Entry Strategy: Enter a long position after confirmation with stops placed below the lower boundary of the NWOG
- Target Selection: Target the next significant liquidity level above, such as recent swing highs or untested fair value gaps
Scenario 2: Price Below NWOG
- Gap as Draw on Liquidity: When price is below the NWOG in a bullish bias, the gap may act as a liquidity attraction zone
- Wait for Gap Test: Wait for price to approach and test the NWOG
- Look for Reclamation: Enter after price closes above the NWOG, confirming bullish strength
- Support Conversion: Once price reclaims the NWOG, it often converts to support, offering multiple long opportunities on retests
2. Trading Bearish Bias with NWOG
When your market bias is bearish, there are two primary scenarios to consider when trading NWOGs:
Scenario 1: Price Below NWOG
- Wait for Retracement: When price is trading below the NWOG, wait for it to retest the gap
- Look for Bearish Confirmation: Watch for reversal signals such as bearish candlestick patterns or a downside Market Structure Shift in lower timeframes
- Entry Strategy: Enter a short position after confirmation with stops placed above the upper boundary of the NWOG
- Target Selection: Target the next significant liquidity level below, such as recent swing lows or untested fair value gaps
Scenario 2: Price Above NWOG
- Gap as Draw on Liquidity: When price is above the NWOG in a bearish bias, the gap may act as a liquidity attraction zone
- Wait for Gap Test: Wait for price to approach and test the NWOG
- Look for Reclamation: Enter after price closes below the NWOG, confirming bearish strength
- Resistance Conversion: Once price reclaims the NWOG to the downside, it often converts to resistance, offering multiple short opportunities on retests
3. Consequent Encroachment (CE) Strategy
The 50% level within an NWOG (Consequent Encroachment) often serves as the most reactive price point:
- Higher Precision Entries: Use the CE level for more precise entries rather than waiting for price to test the entire gap
- Reaction Monitoring: Watch for strong price reactions (rejections or accelerations) exactly at the CE level
- Reduced Risk Exposure: Place stops beyond the opposite edge of the gap for better risk management
- Multi-Gap Analysis: Pay special attention when multiple NWOGs have overlapping or nearby CE levels, creating a high-probability zone
Integration with Other Smart Money Concepts
NWOGs become even more powerful trading tools when integrated with other Smart Money Concepts. Here's how to combine NWOG analysis with other ICT concepts:
NWOG with Market Structure
Understanding how NWOGs interact with the broader market structure enhances their effectiveness:
- Higher Timeframe Analysis: Always analyze the market structure on higher timeframes (daily, weekly) before trading NWOGs
- Structure Breaks: NWOGs that coincide with a Break of Structure (BOS) often signal the beginning of a new trend
- Retracement Entries: Use NWOGs as potential entry points during retracements in a trending market
- Change of Character: When price behavior changes around an NWOG (e.g., failing to fill a gap that would normally fill), it may signal a significant shift in market structure
NWOG with Order Blocks
The combination of NWOGs and Order Blocks creates powerful confluence zones:
- Order Blocks Within Gaps: Identify any Order Blocks that formed within or near an NWOG for high-probability trade setups
- Gap as Mitigation Zone: NWOGs often serve as mitigation zones for nearby Order Blocks
- Compound Confirmation: An Order Block rejection at an NWOG level provides multiple confirmations for a trade entry
- Stop Placement: Use the extremes of both the Order Block and NWOG for more precise stop-loss placement
NWOG with Fair Value Gaps
NWOGs themselves are a type of Fair Value Gap, and their interaction with other FVGs is significant:
- Overlapping Imbalances: When an NWOG contains or overlaps with a Fair Value Gap, the zone becomes particularly important
- Gap Filling Sequence: Understand which gaps (NWOG or FVG) are likely to be filled first based on their size and market context
- Compound Targets: Use multiple gaps as a sequence of targets for scaling out of positions
- Institutional Footprint: Multiple unfilled gaps in the same area often indicate significant institutional interest
NWOG and Liquidity
NWOGs have a special relationship with market liquidity:
- Liquidity Voids: NWOGs represent areas where no transactions occurred, making them natural liquidity voids
- Stop Hunting: Price often moves toward NWOGs to capture stops placed at these levels by retail traders
- Session Timing: NWOGs tend to be tested during high-liquidity periods such as London or New York session opens
- Smart Money Footprint: How price interacts with NWOGs often reveals institutional trading intentions
Common Mistakes When Trading NWOGs
Avoid these common pitfalls to improve your success rate when trading New Week Opening Gaps:
- Trading Without Bias: Attempting to trade NWOGs without first establishing a clear market bias based on higher timeframe analysis
- Ignoring Market Context: Treating all NWOGs equally without considering their location in relation to key support/resistance levels or market structure
- Premature Entries: Entering trades as soon as price touches an NWOG without waiting for confirmation signals
- Overlooking Gap Size: Not accounting for the significance of gap size - larger gaps may be more likely to fill partially rather than completely
- Single Timeframe Analysis: Focusing only on one timeframe rather than using a multi-timeframe approach to confirm NWOG setups
- Neglecting Consequent Encroachment: Failing to mark and trade the 50% level within gaps, which often provides the strongest reactions
- Improper Stop Placement: Placing stops too tight within the gap rather than beyond its boundaries
- Forcing Trades: Attempting to find NWOG setups when none exist instead of waiting for high-probability opportunities
Advanced NWOG Trading Techniques
Master these advanced concepts to take your NWOG trading to the next level:
- Multiple NWOG Analysis: Track at least 3-4 recent NWOGs on your charts to identify areas where multiple gaps overlap or cluster
- Gap Width Analysis: Categorize gaps by size - wider gaps often indicate stronger institutional interest and may have different filling patterns
- Gap Direction Anomalies: Pay special attention when an NWOG forms against the prevailing trend, as this may signal a potential reversal
- Seasonal Gap Patterns: Analyze how NWOGs behave during different market seasons or around recurring economic events
- Volume Profile Integration: Combine NWOG analysis with volume profile to identify high-volume nodes within or near gaps
- Market Session Correlation: Understand how different trading sessions (Asian, London, New York) interact with NWOGs
- NWOG Exhaustion: Recognize when a gap has been tested multiple times and may be losing its influence on price
- Composite Gap Strategy: Trade setups where NWOGs align with New Day Opening Gaps (NDOG) or New Month Opening Gaps (NMOG)
Conclusion
New Week Opening Gaps (NWOGs) represent significant institutional price imbalances that offer valuable insights into market dynamics and potential trading opportunities. By understanding how these gaps form, calculating their key levels (particularly the Consequent Encroachment), and integrating NWOG analysis with other Smart Money Concepts, traders can identify high-probability setups aligned with institutional order flow.
The most successful NWOG traders recognize that these gaps are not standalone signals but part of a comprehensive market framework. By combining NWOG analysis with proper market structure assessment, order block identification, and rigorous risk management, traders can develop a robust approach to exploiting these weekend price imbalances.
Remember that mastering NWOG trading requires practice, patience, and continuous refinement of your approach. Start by identifying these gaps on historical charts, observing how price reacts when it returns to these levels, and gradually implementing NWOG-based setups in your trading as your pattern recognition skills develop. With consistent application, this powerful concept can significantly enhance your trading edge and help you align with, rather than against, institutional order flow.