Recently I have been focusing too much on S/R and not enough on the LOLR.
While it is S/R that gives a Reversal trade a high probability of success, I have been misusing this concept in the following ways:
1) Regardless of what has happened in the past, anticipated S/R is always tentative unless confirmed by the PA. I have been a little mechanical in not observing and waiting for this confirmation.
2) In addition to price stalling at S/R, there needs to be some kind of pressure change in the Reverse direction. Then, once price comes back to test S/R, I have a chance to place a stop close to the danger level. I have been using S/R more as a range, resulting in very high information risk Reversal entries. This is what caused the early entries and resulting whipsaw today. The exception to this would be when the broader context presents a compelling case for taking a high information risk Rev trade. But this should be the exception.
Solution:
The 5s is a great bar interval to use during the open, especially when price opens close to an important S/R zone. The speed and range of the action during the open warrants the 5s.
However, relying too much on the 5s during slower periods has resulted in early, high information risk entries (as described earlier).
The solution would be to change focus from the 5s to the 1 min once the opening thrust has been established and overall pace slows. Thereafter, basics like the crossing of DS line would be used as the information needed to validate tentative S/R into confirmed S/R.
Once S/R has been confirmed and LOLR established, I can once again zoom in and use the 5s for more precise and lower price risk entries. The 5s also serves as a good trade management tool in the event of adverse action upon entry.
