Trade Reviews

What to do if Your Stock Gaps down -49%


Yesterday one of my choices for the watchlist was $HMPR.

This morning $HMPR gapped down -49%.

Even though I’m out of the market right now due to the indexes being below their 50 day moving averages, I can tell you what I would have done in that situation.

I would have crossed HMPR off my list.  And gone about my business.

If I was already in HMPR I would have probably cussed a bit, closed out the trade, and gone about my business.

Here’s the chart as it looked on the watchlist:

And here’s how it looked this morning:

Ouch!  Not good.

I never said the way I trade is a safe way to trade without lots of pitfalls and volatile price action.

Just have to do the right thing when the time comes.

So how big of a gap down is enough to make me cross a potential trade off my list?  i would say anything greater than -5% — or any gap that changes the overall landscape of the trade.

And how much damage would this have done to total equity if I was in it?  well — 50% of 1/5 of total equity would have been a -10% loss to total equity.  Not great but in no way a game changer.  And don’t worry, there are plenty of +50% gap ups that come your way to balance things out.

Oh well, onward and upward!


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