Price gapped lower on the market's open this morning, right below last week's low. Last week's low served as a resistance level, although price did break it for a short while (filling the gap) before retreating.
I attempted to trade the break of this morning's low. When price is marching into 'virgin' price levels that haven't been touched in months or years, it's tempting to become greedy and aim for a large reward. This is because support and resistance aren't really clear, and any old S/R levels from months or years ago aren't reliable.
I tried to control my greed and aimed for a profit of 1.25R. I hit my profit target and closed the trade. At this moment, the downward move is stalling.
Reasons why I took the trade:
1) Lower swing highs and lows were formed (especially at the 50% retracement level, which is a major bearish signal)
2) H4, H1 and M5 momentum were all bearish
3) Price was just beginning to poke below the previous major swing lows. I knew stops below the swing lows were just about to get hit. An entry with a tight stop loss would give me the opportunity to run those stops and profit at low risk.
(click to enlarge)
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