You see a stock breaking out, up 15% already. Your heart races. You know you should have been in earlier. The chart is going vertical. Before you can think it through, you are clicking buy. This is chasing - and it destroys more trading accounts than almost any other mistake.
What Is Chasing a Trade?
Chasing occurs when you enter a trade after it has already made a significant move in your intended direction. You are essentially buying high because you are afraid of missing more upside, or shorting low because you are afraid of missing more downside. The emotional rush of seeing big moves creates an overwhelming urge to participate, even when the optimal entry point has long passed.
Chasing is not just buying late - it is abandoning your trading plan because emotions have taken over. It represents a complete breakdown of discipline in pursuit of quick profits.
The Chaser's Fate
Studies show that chasers buy near short-term highs more than 70% of the time. They enter at precisely the worst moment, just as profit-takers are selling and momentum is exhausting. The trade reverses, and they panic sell at a loss.
The Psychology Behind Chasing
Fear of Missing Out (FOMO)
FOMO is a primal emotion. Watching others profit while you sit on the sidelines triggers genuine psychological pain. Your brain interprets it as exclusion from the group, which activates the same neural pathways as physical pain. To escape this discomfort, you impulsively enter - and usually regret it.
Regret Avoidance
The anticipated regret of missing a big winner feels worse than the anticipated regret of taking a loss. This is irrational but very real. We tell ourselves "I would rather lose money than watch this stock double without me." This thinking guarantees losses over time.
Recency Bias
When you see a stock that went from $50 to $80, your brain extrapolates: it will probably go to $110, then $140. The recent trend dominates your thinking, making a pullback seem impossible. But stocks do not go up forever, and every extended move eventually reverses.
Social Proof
When everyone on social media is talking about a stock, when all the gurus are buying, when the chat rooms are buzzing - it feels safe to join. But by the time a trade is popular, the easy money has already been made. You are providing exit liquidity for those who entered earlier.
Why Chasing Is Mathematically Disastrous
Terrible Risk-Reward
Every chase entry has poor risk-reward. If you buy after a stock has run 20%, your potential upside is limited (it might go another 10%), while your downside is significant (it could retrace the entire move). Good trades require good risk-reward; chasing provides the opposite.
Wide Stop Loss Requirements
When you chase, you often cannot use a sensible stop loss. The logical stop - below the breakout level or recent support - might be 15% away. Either you use an irrationally wide stop or you place it too tight and get stopped out by normal volatility.
Extended Price = Extended Risk
Stocks that have made big moves are statistically more likely to reverse than to continue. Mean reversion is real. Extended moves create overhead supply as new buyers become underwater. The farther price extends, the more violent the eventual snapback.
Key insight: The market will always provide new opportunities. There are thousands of tradeable stocks, and the market is open 252 days per year. Missing one trade does not matter. There is no opportunity cost to patience - only opportunity cost to bad entries.
Real-World Chasing Scenarios
Scenario 1: The Breakout Chase
A stock breaks above resistance at $100. You see it at $108. You buy at $109 because it is "still going." It hits $112, then reverses to $98 within days. Your 8% late entry became a 10% loss.
Scenario 2: The Meme Stock Chase
Social media is exploding about a stock. It is up 200% in a week. You buy because "it is going to $1000." It drops 60% over the next month. You are left holding a position at a ridiculous price while early buyers took profits.
Scenario 3: The Panic Chase
A stock you were watching breaks out while you were away. You panic and market order in, paying $2 above the optimal entry. That $2 overpayment wipes out your entire profit when the stock only goes $1.50 higher before reversing.
How to Stop Chasing
1. Pre-Define Your Entries
Before the market opens, identify your setups and your exact entry prices. Write them down. If the stock moves past your entry without filling you, cross it off your list and move on. No exceptions.
2. Use Limit Orders Only
Never use market orders for entries. Limit orders force you to specify a price in advance, preventing impulsive chasing. If your limit does not fill, the trade was not meant to be.
3. Implement the 5-Minute Rule
When you feel the urge to chase, wait five minutes. Walk away from the screen. The intensity of FOMO fades quickly with time. After five minutes, the urge often disappears - and so does the bad entry you almost took.
4. Track Your Chases
Mark every trade where you chased as "CHASE" in your journal. Review these monthly. Calculate your win rate and average P&L on chase trades versus planned trades. The data will shock you into discipline.
5. Celebrate Missed Trades
Reframe your thinking. When you successfully resist chasing a stock that then goes higher, congratulate yourself. When that same stock eventually reverses (they always do), feel proud that you avoided the trap. Every avoided chase is a win.
6. Study Mean Reversion
Learn about extended moves and mean reversion. Understand that stocks that are up 20% are more likely to pull back than to continue 20% higher. This statistical reality should temper your FOMO.
7. Focus on Process, Not Outcomes
Your job is not to catch every move. Your job is to execute your plan. A stock can go up 500% and if it was not in your plan, it was not your trade. There is no failure in missing trades that were never yours to take.
Analyze Your Entry Timing
Pro Trader Dashboard helps you analyze whether you are entering at optimal prices or chasing moves. See your entry quality metrics and improve your discipline.
The Patient Trader's Edge
The best traders are infinitely patient. They know that the market rewards discipline, not desperation. They let most opportunities pass because they are waiting for their specific setups at their specific prices. When those setups appear, they execute without hesitation. But they never, ever chase.
Warren Buffett famously said investing is like baseball with no called strikes - you can let countless pitches go by waiting for your perfect pitch. Trading is the same. Your edge comes from selectivity, not activity.
Summary
Chasing trades destroys accounts by forcing terrible entries with poor risk-reward. It stems from FOMO, regret avoidance, recency bias, and social proof. The math of chasing is brutal: you buy near tops, require wide stops, and face high reversal probability. Stop chasing by pre-defining entries, using limit orders only, implementing waiting periods, tracking your chases, celebrating missed trades, and focusing on process. Remember: patience is your edge. The market will always offer new opportunities to those who wait.
Learn more: trading psychology tips and when to take profits.