Handling Gaps that go Against you -- trading strategies?

KCalhoun

KCalhoun

How do you manage bad gaps?

I will start scaling out premkt if it trends down.

Usually though, they chop around, so I stay clear til the opening bell. I stop out after 9:30 if it drops .50 and re-enter if it bounces.

Gaps often fill, so I don't just instantly stop out.
 
sure.. i was long uvxy overnight thur.

small gap down fri. i didn't sell

uvxy10sepb.jpg



vs typical gap down clov

clov10sep.jpg
 
Right re UVXY holding through gap down worked out. The CLOV chart is just an example of a gap down continuation.

Looking for ideas in case inverses gap down tomorrow. My plan is:

- if they gap down premkt and keep trending down before the bell I'll sell all. Will rebuy if they go back up quickly.
 
Some instruments gap more than others. Be aware of the instruments propensity to GAP. Don't use tactics that are not "gap" proof on instruments that gap.

Take your loss and start over. A gap should not surprise you. It should be part of the trades expectations, after you have researched the instruments historical charts.
 
What am I missing here? CLOV gap filled, then went down.

Play the gap with a larger than normal stop (1.5 times is normal, if the market environment suggests it is not likely to be a runner) to let it play out. Ride it if it continues back through gap, otherwise bail if it doesn't.
 
Good points.... I'm long a few hundred UVXY, how would you guys play it if it gaps down against me to say 21? Or gaps up to 25? I'll be exiting in several trades either way
 
KCalhoun said:
How do you manage bad gaps?

I will start scaling out premkt if it trends down.

Usually though, they chop around, so I stay clear til the opening bell. I stop out after 9:30 if it drops .50 and re-enter if it bounces.

Gaps often fill, so I don't just instantly stop out.
More...
%%
Depends on my schedule\ plan;
took some smaller profits in SPXS, spxu, today.
2.5% gap loss in sdow, but lets see what close price is................................................................................................KC, your good on super diversification in inverse ETFs;i usually dont do more than5 different inverse ETFs@ a time:caution::caution::caution::caution::caution:
 
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