Is there a specific rational for not going flat at the end of the day (or week)?
Not really. I make exceptions for stocks that are expected to report earnings before the next open, and try to avoid holding those stocks overnight. Otherwise, I count on the law of large numbers, and figure with enough positions, some will gap in my favor, and some will gap against me, so the overall risk is not really bad.
Also, by holding numerous positions, I'm rarely especially concentrated in any one. Therefore, even a bad gap won't be especially painful, since the position represents such a small percentage of total equity. Note that for me, a relatively 'large' overnight position might only be 0.5% of my account value, so clearly the risk is well contained. I take risk management very seriously, because if you don't, you are risking your career.
I should probably add that if I thought holding positions overnight were causing me incremental losses, then I wouldn't do it. Over the long run, however, I haven't noticed this to be the case (although I haven't done a rigorous study on the topic, either). Also, note the action of closing positions is not without cost. You have commissions to pay, as well as potentially a spread (and maybe) slippage cost incurred with closing out your trade at the end of day. |
