- Joined
- Sep 15, 2008
- Messages
- 695
- Reaction score
- 498
Let me ask you this and this may be naive but a stop loss isn't a guarantee. Could a stock theoretically plunge 50% on bad news say 3 to 1.50 over minutes and your order not yet filled until it's at 1.50 due to no buyers at the higher 2.75 limit you placed. I'm sure it is rare but is that not a risk you take ?
It happens everyday almost-- just look at the small-cap biotech companies that have a failed clinical trial. Novavax dropped 80% in 1-day a few months ago.
When trading these stocks you have to be aware of big events and earnings. I never hold for any of them because there is too much risk of a huge loss.
On the contrary, if a stock has great news, there is usually time to get in and catch some of the gains.
This morning I made a killing on $EYEG. They announced a deal with Valeant today. It was already up 40% in the pre-market-- I waited about 30 minutes after market open for a dip and recovery. Grabbed shares at $2.35-- huge buying pressure was coming back into the chart on the 1-minute candles. Ended up selling my shares at 2.85 and 3.75 (wanted to get out before $4 resistance on the daily and weekly chart). Gaining over $1 per share in 1-day on a penny stock is huge-- I wait and wait for these kinds of trades. But using a stop is crucial-- I always start trailing my stop to break even once I have over a 5% gain. It isn't always ideal but it has saved me from some crazy losses. Turning a profit into a loss is not acceptable if you want to be a trader-- basically like getting a $100 bill at Walgreens and giving the customer $200 in change. Luckily $EYEG never triggered my stop so I was able to ride my 2nd half for huge gains.