stoploss
The problem when price comes back from a high is whether we're dealing with a retracement or a reversal (ignoring the additional complications of small pullbacks or the start of a flat periods).
At the time you never know and all you can do is make assumptions which are confirmed, or otherwise, by the subsequent action.
For example, in an established uptrend I assume that a 3+ bar fall back from a high is a retracement, unless it breaks an earlier swing low (when I'd assume a reversal and change of trend)or is too deep (each to their own definiton here). Thus, I assume that the "final" bar is a swing low if its high goes and I trade that break long. In reality it is only a
potential swing low and if the price doesn't move on from there to new highs then I assume that we might be dealing with a reversal and I protect my position.
When thinking about a change of swing trend (which is crucial because it determines whether I will be favouring longs or shorts) I see it as a series of lights that come on as the price develops.
Each can establish their own key features, but here's an example:
failure to make new high - first light
penetration of potential swing low - second light
penetration of substantive swing low - third light
close below substantive swing low - fourth light
ample time (and/or %age) below substantive swing low - fifth light
successfull first retracement - sixth light
Even with the same list, different traders will have different ideas on the number of lights to be lit before they will call a change in trend and how much illumination they need to make an assumption and trade it.
just my opinion
good trading
jon
