Pairs Trading

[apovzedVidly]

I wasnt trading when September 11th 2001 happened. And im sorry to bring it up as it may be a sensitive subject to some.

I am a swing trader and its crossed my mind when i go out during a trading day that if some kind of terrorist activity occured, what would i need to do to keep my losses small.

My question is this. Say your hold a $10,000 long stock in the QQQ or DIA position and the news comes out of a terrorst attack on a large scale similar to that mentioned above. (Touch wood).

What the hell do u do? if u have a stop loss its likley to hit it and sell the stock. but how would u guys view a situation like this

[aqecaen]

Look on the bright side.....if you're long in the market and they catch Bin Laden, you're laughing....... http://static2.trade2win.com/boards/images/smilies/icon_lol.gif

If something contrary to your position, long or short, happens; you just have to hope that your stop-loss is tight and gets filled promptly (which is in doubt if the market 'spikes' in either direction... http://static2.trade2win.com/boards/images/smilies/icon_confused.gif )

Regards

edit - and if your position is 'in the money' use a trailing-stop to protect profits.

[ariuqloqo]

you have a fair point on that. but like the capture of sadam. the market rallied in the morrning then closed lower.

A terror attack is likely to have more of a long term effect on price right?

[Alfredokivy]

Read up on pairs trading that has been talked extensively on this site by Grey1. If you are able to do this then market direction becomes irrelevant.

[AlekseyPlupt]

"what would i need to do to keep my losses small."
Obey your rules - it doesn't matter what the cause is when your stop is hit :-)