diff --git a/CHANGELOG.md b/CHANGELOG.md
index 6fe3b5f60..44fd26621 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -4,6 +4,7 @@ Please add your own contribution below inside the Master section
 Bug-fixes within the same version aren't needed
 
 ## Master
+* update doc to give warning on potential incorrect coverage in watch mode - @connectdotz
 
 -->
 
diff --git a/README.md b/README.md
index 70ed805d6..4cb59717a 100644
--- a/README.md
+++ b/README.md
@@ -111,6 +111,8 @@ The coverage mode, along with watch mode, are shown in StatusBar:
 _(The initial coverage mode is `off` but can be changed by adding `"jest.showCoverageOnLoad": true` in settings.)_ 
 
 
+**Warning**
+Coverage info might be less than what it actual is in "watch" mode (with `--watch` flag), where only changed files/tests are run (see facebook/jest#1284). To ensure absolutely correct coverage, we did consider using `--watchAll` with coverage, which could have significant performance impact. Not sure which problem is worse, therefore no change has been made, we are still default to `--watch` even with coverage on. (Maybe a new customization setting to override it if enough people want it... PR is welcome.)
 ### How to customize coverage overlay
 Coverage overlay determines how the coverage info is shown to users. This extension provides 2 customization points: 
 1. coverage style via `jest.coverageFormatter` 
diff --git a/src/JestProcessManagement/JestProcessManager.ts b/src/JestProcessManagement/JestProcessManager.ts
index 625055b2b..9f4795d1d 100644
--- a/src/JestProcessManagement/JestProcessManager.ts
+++ b/src/JestProcessManagement/JestProcessManager.ts
@@ -42,7 +42,7 @@ export class JestProcessManager {
         }
         this.removeJestProcessReference(exitedJestProcess);
         const jestProcessInWatchMode = this.run({
-          watchMode: WatchMode.Watch,
+          watchMode,
           keepAlive,
           exitCallback,
         });
diff --git a/tests/JestProcessManagement/JestProcessManager.test.ts b/tests/JestProcessManagement/JestProcessManager.test.ts
index 5d081bd7a..6c85d3d20 100644
--- a/tests/JestProcessManagement/JestProcessManager.test.ts
+++ b/tests/JestProcessManagement/JestProcessManager.test.ts
@@ -161,36 +161,46 @@ describe('JestProcessManager', () => {
       );
     });
 
-    it('binds the provided exit handler to the both jest processes', () => {
-      const eventEmitterForWatchMode = new EventEmitter();
-      const onExitMock = jest
-        .fn()
-        .mockImplementationOnce((callback) => {
-          eventEmitter.on('debuggerProcessExit', callback);
-        })
-        .mockImplementationOnce((callback) => {
-          eventEmitterForWatchMode.on('debuggerProcessExit', callback);
-        });
+    it.each([[WatchMode.Watch], [WatchMode.WatchAll]])(
+      'pass watchMode $s and bind the provided exit handler to the both jest processes',
+      (watchMode) => {
+        const eventEmitterForWatchMode = new EventEmitter();
+        const onExitMock = jest
+          .fn()
+          .mockImplementationOnce((callback) => {
+            eventEmitter.on('debuggerProcessExit', callback);
+          })
+          .mockImplementationOnce((callback) => {
+            eventEmitterForWatchMode.on('debuggerProcessExit', callback);
+          });
 
-      jestProcessMock.mockImplementation(() => ({
-        onExit: onExitMock,
-      }));
+        jestProcessMock.mockImplementation(() => ({
+          onExit: onExitMock,
+        }));
 
-      jestProcessManager.startJestProcess({
-        exitCallback: exitHandler,
-        watchMode: WatchMode.Watch,
-      });
+        jestProcessManager.startJestProcess({
+          exitCallback: exitHandler,
+          watchMode,
+        });
 
-      eventEmitter.emit('debuggerProcessExit', { stopRequested: () => false, watchMode: false });
-      eventEmitterForWatchMode.emit('debuggerProcessExit', {
-        stopRequested: () => false,
-        watchMode: true,
-      });
+        eventEmitter.emit('debuggerProcessExit', { stopRequested: () => false, watchMode: false });
+        eventEmitterForWatchMode.emit('debuggerProcessExit', {
+          stopRequested: () => false,
+          watchMode: true,
+        });
 
-      expect(exitHandler).toHaveBeenCalledTimes(2);
-      expect(exitHandler.mock.calls[0][0].watchMode).toBe(false);
-      expect(exitHandler.mock.calls[1][0].watchMode).toBe(true);
-    });
+        //verify watchMode has been passed on correctly
+        expect(jestProcessMock).toHaveBeenCalledTimes(2);
+        expect(jestProcessMock.mock.calls.map((c) => c[0].watchMode)).toEqual([
+          WatchMode.None,
+          watchMode,
+        ]);
+
+        expect(exitHandler).toHaveBeenCalledTimes(2);
+        expect(exitHandler.mock.calls[0][0].watchMode).toBe(false);
+        expect(exitHandler.mock.calls[1][0].watchMode).toBe(true);
+      }
+    );
 
     it('the exit handler for the non-watch mode passes the jest process representing the watch mode as the second argument', () => {
       const eventEmitterForWatchMode = new EventEmitter();