Day traders' after-market lounge December 10, page-18

Sometimes we get caught at the top in a typical momentum trade out of chance. Some tops aren't as easy to identify but if you are always getting stuck in these better to just avoid them completely. The first step to minimise the damage is to work out what 1-2 pips = % wise as a loss. If it is automatically 10% you are going to have a really hard time being profitable and it won't take much to experience a significant drawdown unless you calculate your position to ensure that 10% = 1-2% of your actual account on that trade. That could work. But you still need edge in order to make money so you would need to make at leat 15-30% if that is your risk in order to make money depending on the win rate. Maybe more, it depends.

If you are entering a trade based on emotion you absolutely should not trade it. Even if it's a good entry you will mismanage the trade because your brain is already in casino mode and you aren't thinking at your best state of focus. I have been there before, getting in and out is a disaster with fomo even if to begin with the trade goes your way. Make a conscious decision to not enter any trades that are running if you struggle with this. Your stops are essential in a runner, always hit out never waver, that keeps the losses small. Protect your capital, as a trader losses will be frequent that is the cost of doing business so become a good and discipline loser. Spend some time watching trades run and don't trade them. Learn the pump and dump pattern on the chart and the tape, this way you will gain an intuitive sense for the momentum so that if you are in a trade you are better at using your discretion in real time. Repetition, Repetition, Repetition. In my honest opinion it is better to miss a trade than chase a trade. I would rather sit on the sidelines than get stuck. You need to learn to catch the beginning or middle of these moves.

Another tip, at the top you will start to see the bars have long tails above them. What that is showing is price is hitting highs but being rejected and coming down. Anywhere in a chart in a run up where the buyers keep topping like hitting a level and then not pushing it up, 2, 3 times double triple tops usually indicates the bullish momentum is dying. Avoid these. I have a whole list of technical aspects of price reversing at a top showing exhaustion that I have been studying - I found Al brooks resources useful for this and I find I am identifying these kinds of patterns better now. You need to study so that in the moment you are not acting on emotion you know exactly what you are looking at and what is a good entry. You are chasing because you don't know what you are looking for, if you know what you are looking for you will know when its a high probability entry or a lower one. Every day there will lots of different trades that pop up you need to sift through which are more likely to work rather than less likely to work. Look at the whole chart, the before bars tell a story too. Bit of a tangent might be helpful I hope. Best of luck.