Quote:
Originally Posted by scho63
Everyone evaluates or handles different but how do YOU handle stocks that are going to GAP down on the open, usually due to bad news like missed earnings or scandal?  |
Gap downs are pretty rare when you're trading stocks on breakout but they CAN happen. You'll find many gap downs happen on stocks that have recently retraced and many think it's now a "buy cheap" type deal when in fact it's just a stock that wants to keep sliding.
Since I have good risk management strategies on most of my trades, losing 4% or less on average ALWAYS, if I have a gap down and lose say 10% on a position, it's not ideal but I've done well following my other rules to not make this tank my account.
These rules also help lessen the blow or chance of gap downs.
1. Never put more than 10% of your total account value on a trade.
2. Never hold a stock through an earnings date if you're trading.