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A near-perfect example of a breakout and a retracement. They are not all this clean, but this is what you should have in mind when you're trying to decide in real time the probabilities of your trade being successful. In a case like this, there's nothing to think about.
And whether it ultimately fails or not, you still have your 5+ points.
Would a valid buy entry also be on the break of the supply line (1200-1300) and subsequent retracement ( failure ), that is above the bar that created the peak of that retracement? There were several channels and "fanned" demand lines unbroken and all above their medians?
Very interesting thread, I've just started watching your SLA on the 5 min/15/Daily TF. Thank you for sharing and glad you're here at BM. I haven't been able to tolerate EliteTrader for quite some time.
The purpose of this simple and uncluttered chart was to show how elegant a retracement after a breakout can be, as if the market is shoving money into your hands. However, there is a lot more to this for one who shorted the reversal at 42 at the open.
If one enters the reversal/rejection, he's in long before the retracement, if there ever is one, which is the point of reversal trading anyway. If one draws a supply line, it's broken just after the HL at about 22-23. But if one is trading a 5m chart, there's no retracement before price reaches the upper limit of the range again, which is where 1m charts come in so handy when trading ranges. Of course, if one doesn't like trading ranges, it's a moot point, but learning to do so can be rewarding if the range is wide enough to be profitable.
Still reading @DbPhoenix , but here's the 5 minute (TF) chart I was looking at. What I focused on was not so much the ranging, but more the inside upward channels created by the buyers. So I guess this would constitute a continuation entry?