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Gap Risk

So first gap example that jumps to mind and imagine a strategy that gets somewhere near Tech’s risk numbers. [Up trend – breakout of consolidation – trail stop on daily low.]

Buy SRX $36.24 on 10/3/15 stop $35.46

Risk @ 1.5% of Capital = $ 1,500

Risk per share = $36.24-$35.45 = $0.79 per share

$1,500/ $0.79 = Buy 1898 shares for $68,783.

Next 3 days lift trailing stop:

$35.66

$38.01

$38.83

Whoo Hooo – In the money: stop nearly $5K above purchase price.

Day 4 whoops – Gap open $15.00, 1898 shares sold on open

Loss ($36.24-$15.00) * 1898 = $40,313.52

Loss is not limited to the mathematical 1.5% prior to the trade

Actual Loss = 40% of the account.

[ATTACH=full]71481[/ATTACH]

Maybe in theoretical forum la la land gap risk doesn't matter, but in live markets it does..... eventually

<blockquote data-quote="craft" data-source="post: 949754" data-attributes="member: 16447">Gap RiskSo first gap example that jumps to mind and imagine a strategy that gets somewhere near Tech’s risk numbers.&nbsp; [Up trend – breakout of consolidation – trail stop on daily low.]Buy SRX $36.24&nbsp; on 10/3/15 stop $35.46Risk @ 1.5% of Capital = $ 1,500Risk per share = $36.24-$35.45 = $0.79 per share$1,500/ $0.79 = Buy 1898 shares for $68,783.Next 3 days lift trailing stop:$35.66$38.01$38.83Whoo Hooo – In the money: stop nearly $5K above purchase price.Day 4 whoops – Gap open $15.00, 1898 shares sold on openLoss ($36.24-$15.00) * 1898 = $40,313.52Loss is not limited to the mathematical 1.5% prior to the tradeActual Loss = 40% of the account.[ATTACH=full]71481[/ATTACH]Maybe in theoretical forum la la land gap risk doesn&#039;t matter, but in live markets it does..... eventually</blockquote>

[QUOTE="craft, post: 949754, member: 16447"] [B]Gap Risk[/B] So first gap example that jumps to mind and imagine a strategy that gets somewhere near Tech’s risk numbers. [Up trend – breakout of consolidation – trail stop on daily low.] Buy SRX $36.24 on 10/3/15 stop $35.46 Risk @ 1.5% of Capital = $ 1,500 Risk per share = $36.24-$35.45 = $0.79 per share $1,500/ $0.79 = Buy 1898 shares for $68,783. Next 3 days lift trailing stop: $35.66 $38.01 $38.83 Whoo Hooo – In the money: stop nearly $5K above purchase price. Day 4 whoops – Gap open $15.00, 1898 shares sold on open Loss ($36.24-$15.00) * 1898 = $40,313.52 Loss is not limited to the mathematical 1.5% prior to the trade [B]Actual Loss = 40% of the account.[/B] [ATTACH=full]71481[/ATTACH] Maybe in theoretical forum la la land gap risk doesn't matter, but in live markets it does..... eventually [/QUOTE]

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