Swing Trade Risk: Managing Overnight Gaps and Multi-Day Drawdowns

Swing trading introduces risks that day traders don't face. Here's how to manage them: **1. Overnight gap management.** For every swing trade, ask: "If price gaps 100 pips against me at Sunday open, what percentage of my account do I lose?" If more than 2–3%, your size is too large. **2. Multi-day drawdown tolerance.** Swing trades can spend 3–5 days in drawdown before moving to target. Define your maximum tolerable drawdown before entry — if you can't hold a 1.5% paper loss for 4 days without panicking, that's too much size. **3. News event risk.** A swing trade through a major data event (NFP, FOMC, CPI) carries binary risk. Plan for this: close before the event, reduce to half-size, or use options as a hedge if available. **4. Correlation check.** If you have 3 swing trades all long USD, you're 3× exposed to one factor. Check your overall portfolio correlation before adding a new trade. What's your biggest swing trading risk challenge right now?