I was wrong, dead wrong on this play. If a stock makes more than three bottoms, I simply walk away and don't mess with it that day. Had I let my ego or emotions lead me in this trade, my loss would have been much larger. As it stood, I lost a half-point, but it could have been much worse. I stuck to my rules and didn't chase a bad trade into larger losses.
Many traders try to make the loss back and continue to chase a stock into a death spiral.
The ironic thing is, I concentrated on the one stock that did not follow what I had projected on the gap down that day. Most of the other stocks on my screen dipped a small amount, then climbed, creating an excellent opportunity to capture profits before they again turned and dropped. I was wrong, dead wrong on this trade, but I moved on quickly to the next trade and more than made up my losses. I play the percentages, and that's the only way I know to win the game. This column provides general information about momentum trading.