Here’s When To Scale Back Your Size

When momentum issues ‘coil up’
in an intraday consolidation pattern, the moves can often be ‘explosive.’

But, a trader has to be willing to accept
different risk parameters based on both the pattern and the stock’s intrinsic
volatility characteristics.

It would be awfully nice if a we could enjoy
placing .10 or .15 stops in many of the high-flying issues as they trigger, and
then expect to catch the bulk of an extraordinary move. The reality is that
these issues usually demand greater initial risk acceptance. I personally don’t
like to accept more than .35 risk on any individual trade, but that rule of
thumb would definitely prevent entry into the majority of today’s momentum
issues. If the high-probability pattern appears though, instead of sitting on
the sidelines, try scaling back your size to adjust for the volatility.

12:22:53

Intraday Setup Alert

Magal Security Systems (MAGS)
has formed an extended 5-minute chart symmetrical



triangle
, starting with yesterday afternoon’s 14:50 bar. Triggers in the
‘explosive’ momentum issue are currently set thru 31.17. MAGS is up 2.36 at
30.72.

 

As it turns out, the upside momentum didn’t take hold and the stop in the
above chart would have been hit. Some might say, ‘oops, my bad’–but, I just
look for forward to the next high-probability trade. Hopefully, by staying
focused, we’ll ‘detect an explosive’ move to the upside, and get back some of
the casualties of war.

Chris Tyler