When holding an overnight stock position, you run the risk of having that stock gap against you at the open.
The way to combat this is to turn to the 15-min trading chart.
Rather than have a stop loss order get hit immediately upon market open, I wait 15-mins before taking action. After the first 15-min bar has closed, I then place my stop outside that candles bar.
In the chart example of BNFT, simply placing my stop a few cents above the first 15-min bar the morning it gapped up prevents me from being stopped out upon market open.
During the session we never broke that first 15-min bar’s high and the proceeding days have fell even more, filling the gap and making a new low.
This technique is a great way to help stay in winning trades longer, while still being responsible with your stop loss placement.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.