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If a share drops suddenly with no chance to exercise my stop loss, should I sell the next day, or wait for a rally, closing the gap, and then sell?

If a share \d\r\o\ps suddenly with no chance to exercise my stop loss, should I sell the next day, or wait for a rally, closing the gap, and then sell?

You have raised several issues in this question:

There is no chance to exercise my stop-loss

I know what you mean - that you were unable to act at the price level at which you set your stop-loss. Instead the price has gapped through that price level. I think that you are misunderstanding what a stop-loss level is. If it is placed with a broker, it is usually an instruction to sell at the best price if the level is breached. The broker would therefore sell at the market even though that level is well below the trigger level for the stop-loss. However, in some markets you may be able to place an order that has limits on the execution price, such that you would have no chance to exercise the stop-loss if a price gapped down quickly and significantly.

Since you have said that you were unable to exercise your stop-loss, I am assuming that your stop-loss was not placed with a broker, but you were intending to exercise the stop-loss yourself manually. So, it comes back to what you mean in your mind or in your investment plan by a stop-loss level. Perhaps you have not thought this out carefully enough. Perhaps you are unrealistically expecting that you will always be able to get out at your stop-loss level or close to it. However, this is only likely to be the case for large liquid shares and in the absence of unexpected news. In the case of thinly traded smaller shares, it is more likely that you will suffer some slippage on your stop-loss. This will also be the case where unexpected news has come out on a large share, such that it has gapped down.

Should I sell the next day?

You should not be asking me this question. Your investment plan should tell you. You should know beforehand what you will do, without hesitation, if a stop-loss level is breached. If you are asking me what should be in your investment plan, then the thing to understand is that there is no simple answer to this question that is always right, except to say that you should act according to the logic and rules of your investment plan.

There are several points of view about what someone should do if their stop-loss is triggered. My view is a simple one. My stop-loss level is where I am wrong about my investment. If the price falls to that price, then I am wrong and should cut my losses. I always sell without hesitation on the next day. For me not to do this, something very unusual would have to have happened after the stop-loss was triggered.

However, my view is not the only one that can be taken. Some people may place stop-loss levels on a different logic to me and their reaction may be different. Also, I will sell even if the price has recovered back above my stop-loss level, whereas other people may not sell in that circumstance. My logic is that I am trading a trend. If the price falls below the last trough, the trend has failed, so I sell, even if there is a subsequent rally. The only exception would be if something really unusual happened - such as a rally so strong that it established a new high for the trend. This is highly unusual and would probably only happen in a takeover situation.

The most usual alternative to my approach is if the person's investment plan requires the closing price to have violated the stop-loss level. This would be where the logic for the investment plan was different to mine - say based on a trend line or a moving average crossover.

Wait for a rally to close the gap I know some people will do this, but I think it is fraught with danger. Exhaustion gaps are never closed by definition. Other gaps may be closed. You could wait to see what happens, but it has then become a "hope" investment. If it is an exhaustion gap, it will be costly. However, if you sell and it turns out to be a common gap, you can always buy the share back. This seems to me to be a far better way to deal with the situation.