Today's 700-point gap-down is the best free lesson on why stop-losses don't cap overnight risk

Seeing a lot of confusion today so putting the mechanics in one place.

A stop-loss order needs a traded price to trigger. When Sensex opened 700+ points below Friday's close this morning (crude spike + West Asia news over the weekend), every price between Friday's close and today's open never traded. If your stop sat in that zone, it triggered on the first tick and filled at or near the open — not at your stop level.

Quick numbers: long from 24,400 with a stop at 24,300 means you planned 100 points of risk. Open prints ~24,180, so your actual loss is ~220 points. More than double the plan, and no order type fixes this. SL-M, SL-L, GTT — none of them can execute on a price that didn't exist.

What actually limits overnight risk: (1) position size — size every overnight carry assuming a ~3% adverse gap, (2) defined-risk structures like spreads, where the hedge leg gaps in your favour as the other gaps against, (3) not carrying overnight at all.

Also worth noting: most of today's gap got bought back by midday. The people who lost most weren't the holders — it was anyone who panic-market-ordered out into the 9:15-9:30 chaos, paying the worst spreads of the day.

How do you all size overnight positions? Fixed % of capital, gap-scenario based, or just avoid carrying entirely?