Behavioural Pattern
Chasing Momentum — Definition, Examples, How to Fix
Buying strength near local highs and selling weakness near local lows — entering moves that are already overextended.
What it is
Chasing momentum is what happens when a trader uses recent strength as the only entry signal. The trade is entered after the move is visible — by which time it's often near exhaustion. Without a structural entry (pullback to support, retest of breakout level), the chase trade has no edge: it's just buying what just happened.
What it looks like
- Buying a stock at the top of a 10% green candle.
- Long perpetual after a 5% pump in the last 15 minutes.
- Entering after the 3rd consecutive higher high without waiting for a pullback.
Why it costs you money
Chase trades reverse against the entry frequently — "buying highs" trades typically have 30-40% win rates vs 50-60% for structure-based entries on the same setup.
How TradeSaath detects this
TradeSaath measures price extension at entry — how far the price has moved from the relevant pivot or moving average at the moment of entry. Entries on extended price are flagged.
How to fix it
- Wait for a pullback to structure before entering.
- Use limit orders at planned levels, not market orders chasing.
- Skip the trade if the move has gone 50% to target before entry.
- Track win rate of "first pullback" entries vs "extended price" entries.
Related
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