I just finished reading Enhancing Trader Performance from Brett Steenbarger. If you own the book, but haven't read it, do yourself a favor and read at least Chapter 8 and 9. You will find something there to enhance your trading performance.
It sharpens your awareness and will let you question what you take for granted. You will have the tools to identify the source of trading problems you might have and you will be shown the way to start solving them. But before you can do that, you need to know where the problem really is.
I have developed a tendency to jump into trades without thinking consciously. There is a signal present somewhere, I might have missed it, but it's moving, it's moving fast and it will move a few more ticks allowing me at least a Breakeven exit. In a trending market, that's basically correct. But there is the point of enough being enough.
And then it goes maybe 2 ticks in my favor and reverses. It reverses fast when momentum is stalling and no fresh buying or selling comes in. We know that all. And such trades can be expensive, as in the blink of an eye they run into your stop, which you never really intended to get hit, as you said to yourself: I'm out long before that Stop is hit.
So I developed an Alert telling me when enough is enough. Sure you need to know what you trade, sure it's timeframe dependant, but so what? I want something which tells me in the 2 minute timeframe I use for my trading charts, when there is a big risk going with the trend regardless of the signal.
I decided that going 45 ticks or more in 14 minutes and closing 6 or less ticks below the low warrants such a label. Why? Because 45 ticks is something between 450$ and 750$ per contract traded (using the 10 US$ to 12.50 € tick value the majority of the contracts I trade have).
Above you can see the alert in action. Sure I might miss an occasional trade, which might mean that I need to adjust the parameters for that particular contract, but it seems for the majority of contracts where I applied this indicator, it looks quite good.
That's what COIL did after the warning, which was given at 68.46. A new high at 68.62 followed before a retracement in the trend materialized
I don't intend to use that warning as Countertrend indicator. As you saw there was still upside potential. It just was limited because COIL had been going quite a distance already in the short and medium term timeframe's.