Is it true that if anyone is trading long enough that they will eventually get caught by a bad news holding overnight? I usually trade with stops like 20-30 cents but will sometimes hold overnight if the stock is above my long entry. There is always the small chance that the stock I'm long has a surprise bad news the exact night afterhours I hold the stock which makes it gap against me 3-4 points. Do other traders take this consideration into their trading plan? My 1R risk would turn into a 10R loss. Any ideas or stories about this to share? Thanks!
it works both ways. sometimes you lose with bad news sometimes you win with good news. a large precentage of the market move is overnight these days.
Actually there is plenty of movement intraday, you just think the overnight moves are large. They are actually pretty small 'these days'
A large percentage of the significant news that moves stocks by large amounts occurs "overnight" (between 16:00 and 09:30 ET). Some of it is predictable, and you can choose to not be in those stocks, or limit/hedge your exposure, at those times. Some examples: - scheduled earnings announcements - scheduled earnings for other companies in a sector with high correlation (like homebuilders) - delayed earnings or filings - "normal" pre-announcement times (some companies are consistent in this) - persistent buyout rumors - extreme historical volatility - SPX/MID/SML/NDX add/delete candidates
if you are using 20-30c stops you shouldn't hold overnight, I believe you have to reap the rewards of holding overnight in order for the risk to be worth it, you will get rocked badly once in a while if you hold overnights and thats a fact!
Just to clarify, I was speaking of the indexes, not stocks. Stock move quite a bit, after hours as well as the next day.
Speaking of overnight moves, the DAX just shot up like a bat out of hell and dragged the US indicies up with it.
Not in the index futures, sometimes they go down but 90% of overnight sessions for the past 5 months are up, cant beat these odds.