When day trading, sometimes we tend to get lost in the weeds. We are likely in the midst of a bit of a momentum blow-off, coming out of volatility squeezes and pushing through the Weekly Expected Move highs for the week. In the chart above, I highlight the last two momentum blow-offs since the 2020 March China Virus lows. In one or two days, we erased a couple of weeks’ worth of gains. 

One way to prevent this, especially if you are buried in your day trading screens, is to always set a disaster stop. That way, no matter what hits the tape if you are trading with your microscope, you are covered. There is no level in particular to target – just decide what the maximum loss is you want to take in an unanticipated liquidation break. Obviously, it needs to be wide enough so as to permit normal fluctuation.