Quote from Matcha:
Price broke the support level. I wanted to join the Momentum. Took the trade out when I saw no FT. The intention of the trade is mostly due to âchaseâ. But I am glad that I had the common sense to take the trade out.
The initial short entry was much earlier, break of the descending triangle.
Once you miss a move, wait patiently, the next entry will come. Chasing momentum is great if you chase it early on, as soon as price breaks.
Chasing momentum once a move is well underway is low probability; you'll mainly end up scalping or scratching, then waiting for the next entry anyway. Now that doesn't mean you absolutely shouldn't chase, because sometimes the momentum is very strong and you're positioned for a good trending move. You have enough experience to do it, then exit quickly, as you did here.
Inexperienced traders can end up with a bad losing day if they chase momentum, the trend reverses and the strength of the previous move convinces them price will eventually turn back their way again, They hold the loser, or add to it, long after it's clear the move has fully reversed and a new trend is on.
Or they'll keep jumping in and out of trades in the same direction as the momentum move, taking loss after loss, again long after price has stated clearly, "I'm going the other way now!"
Chasing, then revenge trading, very common.
After a leg in a trend, there may be indecision (usually if the larger time frame is bull and the move was bear, or vice versa), or a nice clean lower high/higher low, followed by a subsequent move.
As day traders, we like to stay positioned if a trend is on, or reverse if a reversal signal is put in.
Looking at your chart, if I wasn't already short the triangle break, I would've been looking to short a break of the 7:30 pivot low, or if price moved back to the 20-bar MA, I'd look to short a previous bar's low. Keep your eye open for 2-leg pullbacks to the 20, very common, as it was here. That's why I personally use the either/or for entering. Either price doesn't make it to the 20 bar MA, meaning the downside pressure is strong, so I short the breakout of the previous S level; or price works its way back to the 20 MA via a little 2-leg pullback, so I short the break of a previous bar's low IF price doesn't break through the 20 first.
If price breaks through the 20 and a bar closes above it, on it, or only a little bit below it, that is a red flag for me and I may then wait for a bear trap long setup.
So I would've likely shorted off the 2-leg pullback, BUT I would've covered when that failed breakout of the previous S brought price back up through the previous bar's high. I also would very likely have reversed long at the same time, looking for break through previous R in what may now become a range.
If long, I would then reverse short again when price broke the 20 MA, failed to break previous R, and broke back down through the 20. That small red bar with the low at the 20 MA is my setup bar, and a break of its low is my entry trigger to the short side.
If price found support again near previous S in the range, I wash, rinse and repeat until finally positioned for the break either direction (though down was most likely, because one should always assume continuation until proven otherwise and we're still remaining closed beneath the moving average).
Once that range breaks, a possible measured move is in play. Take the distance from the opening spike high to the 8:30-ish pivot low, then subtract that number from the range high around 8:00am. I can't tell exact numbers from your chart but it looks like an initial target for a measured move would be about 12100.
