This service is updated every other Wednesday. Click here to subscribe . Unexpected disasters are an unavoidable part of the trading game. What separates the pros from the amateurs is how they react to these events. Here s a concrete plan to help you manage your trades when the market opens against you.
T here s a great deal of emphasis in the trading community on entering and exiting trades.
However, there s much less discussion about how to manage your open trades, and even less on what to do when things go wrong the darker side of trading. The active trader, more so than any other type of market player, has to know how to handle disaster when it strikes. In today s markets you can finish out the trading day holding a profitable trade only to have that position sabotaged by negative news that comes out shortly after the close or before the next open. The news can be anything from the announcement of an earnings shortfall to an analyst downgrade of the stock s entire group. This news can radically affect other trader s attitudes about the stock, causing it to gap down i.e., open significantly below the previous day s close.