With monster moves coming from stocks this earnings season it's very likely that many investors find themselves on the wrong side of a strong move. Just take a look at a stock like Amazon
Many traders will say you should have stop losses in place, and sure those are fine to use as a backup but stop losses can cause more damage if there is a sudden move. If you set a stop market order, what happens if the stock gaps well beyond your trigger price? Now you have a stop executing at prices that are way worse than you would have hoped. If you had placed a stop limit order then your order would never have been filled and you are still stuck with the losing position.
The first approach these days is to keep your individual positions small enough to withstand this kind of move. Many investors today have the approach of making smaller returns from more positions rather than larger returns from less positions. This can be one simple way to weather a large disaster if it should happen.
Another, very popular method today is to use options in addition to using shares of stock. With the popularity of options in recent years, an investor can better prepare ahead of an earnings announcement, and maybe even make a little money for their efforts. If you find that the large move has already happened, you can still use options to help reduce losses, or even stop them all together.
While options are not for everyone, and it is by no means a magic bullet, it is still a way to find calm in the storm when your favorite stock treats you the wrong way.