Asian Markets and Overnight Gaps – How do you manage?
Been trading some of the Asian equity markets more actively lately, specifically $NKY and $HSI futures, mostly on longer timeframes than my usual intraday. I'm finding the overnight gaps pretty challenging for my current risk management approach. With European and US sessions, gaps are present but seem less pronounced, or at least easier to react to on open.
For those of you regularly trading these, particularly if you're holding positions through the close, how do you adjust your stop-loss placement or overall position sizing to account for potentially large overnight gaps? Do you typically run smaller sizes, or is there a specific technique you use to mitigate this unique aspect of these markets?
That's a good point about the Asian markets and overnight gaps. I've found that using wider stops, or at least a trailing stop that accounts for a typical overnight move, can help. Do you also adjust your position size down significantly to compensate for the increased volatility?