Ask Colin

I bought some shares and the company made a very large capital return. Now the chart has a great gap on it. How should I reset my sell stop?

The key issue here is that a capital return requires an adjustment to the chart so that the data pre capital return is adjusted for the capital return.

I use Insight Trader charting software and take the database manager service which makes all the adjustments for me. If you use charting software, there may be a similar service from your data vendor. Otherwise you will have to make the adjustment manually.

Once you have adjusted the chart, the gap will be gone and you can use the chart to set your sell stops in the normal way for your investment or speculation plan.

Keyword: