Your stop only works while the market is open

The 2 percent rule says you never risk more than 2 percent of your account on a single swing trade. Risk means the loss if your stop is hit.

The rule sets your position size. Take the account, multiply by 0.02, and divide by the distance from entry to stop.

Say the account is 30,000 dollars. Two percent is 600. You buy a stock at 50.00 with a stop at 47.50, so each share risks 2.50. Divide 600 by 2.50 and you get 240 shares.

Notice what the rule doesn't fix. It doesn't fix the stop distance or the number of shares. A wide stop means fewer shares, and a tight stop means more. The dollar risk stays the same, as long as the stop fills at 47.50.

A swing trade sits through nights and weekends. While the market is closed, your stop can't fill.

If bad news lands after the close, the stock can open well below your stop. A stop order then becomes a market order at the open. It fills at whatever price is available, which may be dollars under your level.

Earnings reports are the obvious case. So are company news and market-wide moves overnight. You can't trade any of them from your stop.

The 2 percent rule assumed a fill at the stop. A gap swaps that assumption for the opening price. Your risk on paper and your risk in practice are now different numbers.

Nothing in your process went wrong here. You sized correctly, set the stop and kept to it. The rule has a blind spot between the close and the next open. Swing trading lives in that window.

Keep the same trade: 240 shares bought at 50.00, stop at 47.50, 600 dollars of intended risk.

Overnight, the company cuts its guidance. The stock opens at 44.00. Your stop fills at the open, 6.00 below entry.

The loss is 6.00 times 240 shares, or 1,440 dollars. On a 30,000 account that's 4.8 percent. The 2 percent rule became a 4.8 percent loss without you breaking it.

The ratio is the useful part. The gap was 6.00 against a stop distance of 2.50, so the loss came out 2.4 times larger than intended. A bigger gap would scale it further.

Compute two share counts and take the smaller one.

The first is the normal one: 2 percent of the account divided by the stop distance. In the example, 240 shares.

The second starts from a gap you think is possible on this stock. Pick it from how the stock has opened after past news, and say it's a judgment. Then cap the gap loss at a figure you can live with.

Say you judge a 12 percent gap possible, so 6.00 on a 50 stock. You decide a gap may cost at most 4 percent, or 1,200 dollars. Divide 1,200 by 6.00 and you get 200 shares.

The smaller count wins, so you buy 200. You give up a little upside to keep the bad night survivable.

Five swing trades at 2 percent each is 10 percent of the account at risk at once. A market-wide gap can hit all five on the same morning.

Add up the risk across every open position each evening. Set a ceiling for the total and treat it as seriously as the per-trade number. Where that ceiling sits is your call, but write it down.

Check earnings dates before you enter, not after. If a report lands while you'd be holding, cut the size or close before the report.

Keep a record of your gap fills. Over a few months you'll see how far your real losses ran past your stops. If that gap keeps showing up, lower the per-trade percent until the worst open still fits your ceiling.

Do this before every entry, with the numbers written down. It takes two minutes and one calculator. Use the closing balance, never the one you hope to have. Redo the count if the stop moves before you enter. Skip the trade if count two comes out tiny.