Argument: that risk is more adequately controlled by working test against back end of bars, rather than working violation of front end of bars on entry.
Specifics: On the last swing of the day, here on MNQ, there is a 1-2-3 pattern off the top test against previous swing. Highs of the #3 point @ 13040, could enter say 13039 on sell-limit order @ 13044.75 risk = 5.75 points. OR could enter on sell stop market, @ 13025.50, protective buy stop @ 13044.75. Risk then becomes approximately 19.5 points depending on fill LOL. Quite a difference there. Say the target is initially @ 12952, with R = 15.13! 87 points / 5.75 points on the stop. This on a test of bar back ends.
OK now how bout the other way? R = 4.46 and that is substantially lowered R value. Still a great trade, with R=4, no flies on that, but 3.39 X more risk associated with waiting on confirmation of the 1-2-3 top pattern to enter.
The question: is the extra risk taken to wait for pattern confirmation validated and resultant R-value drop worth waiting to enter the violation of bar lows rather than trading the test of the back end of bar highs clustered up there at 13040? More and more lately I have been working the back ends of bars in an effort to reduce that R-value per trade on average, there are more losses that way, but also substantially better profitability also.
