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!