A gap of this magnitude hurts financially and emotionally. When a stock we are holding overnight gaps lower we treat them all the same, regardless of the size of the gap.
We, give it a few minutes to establish if it can get above vwap, if it can, we then use the low of the day as our stop. In an instance like BAH today where the stock continues lower, we “rip the band aid” meaning we suck it up and sell.
It sucks taking a loss of this magnitude, but I have found that it is what is right. Occasionally a stock like this will turn back higher but most often they will continue to bleed lower. We do not want to “throw good money after bad” and buy more, that is the worst thing we can do.
Also, with this stock, just skimming the headlines, it does not read well, a federal probe into their practices creates is quite serious and once the trust of Wall Street has been broken by a company it can take years for them to regain investors trust.
This is unfortunately, one of the rare times when we have a big unforeseen loss, but hopefully the position sizing was not too large and the overall impact on your trading account is not devastating.
Now is not the time to revenge trade and try to get it all back at once, instead it is time to reconsider risk management and why it is always job number one!