You don't have credit card details available. You will be redirected to update payment method page. Click OK to continue.
The sudden and large price drops of the two stocks GEM and RFG recently must have ‘gapped’ the ‘normal’ stop loss levels of most holders.
Whilst the ‘cut loss’ principle should sensibly and painfully apply, it would be enlightening to know what the professional investors and institutions do when caught in this situation.
Is it an option to wait for a clear sign of reversal – backed by changes to fundamentals – to average down (bad word) and hope to reduce the recovery time?
Thank you.
A: Thanks for the question.
Professional investors and institutions are in the same position as you when it comes to a stock suddenly gapping down.
If anything, some will be in a worse position because their size of holding doesn’t give them the option to sell quickly. There is either insufficient liquidity, or their selling would just exacerbate the price drop.
Bottom line – most hold on and then re-assess when the market finds a level. Some more nimble professional investors might exit or have their stop loss triggered, institutional fund managers will not generally use stop losses.
