What's your advice in trying to stop market makers from making you lose money? (closing opening prices)?

Question

For instance the stock FNM at it's opening today was half of that of the previous day!! How can you as an investor stay away from these volatile stocks with crazy opening and closing price differences. It's bad becasue you can't CUT LOSSES SMALL!!

Answer 1

The market makers aren't making you lose money.  What happened was people heard on the overnight news that the government might take over FNM and leave the shareholders with nothing.  It might not happen, but investors didn't want to take a chance.  What people were willing to offer in the morning wasn't that same as what they were willing to offer the previous evening because of new information.  This is a risk with any stock.  You accepted this when you decided to trade stock.

Besides, you weren't going to sell it anyway.  It was 30.81 on May 6.  It was down to 17.62 on July 8 and you still had the stock.  July 9 it closed at 15.31 down over 2, but you didn't sell.  On July 10, it closed at 13.20, down almost 2 and you didn't sell.  If you wanted to cut your losses short you could have sold before the close on Thursday.  It has been down almost every day for the past month.  You were greedy and wanted to wait for it to "come back" and it didn't work, so the market is against you.  Boo hoo.

Answer 2

It's not hard to avoid extreme volatility. Buy boring stocks of large or medium size companies with steady earnings, and it's highly unlikely they will fall 50% in a day. Extreme volatility rarely appears overnight for a solid company--it builds up as things start going wrong. Finally, you can look at a chart and see if it gaps at the open frequently. If you want to use tight stops, stay away from ADRs.

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Answer 3

The big fish move the little fish. That is how the market has worked for a while. What investors can do is think like the market makers and pick up some winning investments. That is my recommendation for you.