Quote from bmwhendrix:
You are assuming that every pullback is a trade, but it depends on your entry requirements.
If you have already considered that a trend is going to occur and you are waiting for a pullback to trade then yes.
Unless you have a different extra set of rules to apply to pullbacks....but then you will have exactly the same problem.
You will miss some trends - this is the trade off.
Quote from MadeMan:
playing aggresive buy/sell stops depends on the current state of the market aswell as of the level we are @ the moment.
valid stop entrys only justifys if you can anticipate momentum driving price fast and far into the favour of your position .. anything else.. will fck u up.. plying breakouts is risky.. playing pullbacks is les aggressive... but whatever floats ones boat.. ie back/forward testet your entrys? if so shoot! confidence ?
yep - agree, but again, once you have determined that something is going to trend, then you are in the same boat. You need to get on board......if you think something is going to trend you need to be on board, and missing it is pointless.
Buying at support can give a low risk entry....but you dont just buy at every support and hope it turns into a trend right? and if you did adopt the approach to just buy at every support, shouldn't you then also adopt the approach to sell at every resistance? (Which is why DBPhoniex reminds folks - get a plan)
Quote from xelite777:
A trader can make a good living buying breakouts, assuming he can eliminate the vast majority of false signals.
But this requires a LOT of chart studies, this is not something that we can learn in 5 minutes.
And yes, pullbacks or throwbacks do hurt the performance of a breakout, but that does mean we cannot profit from them, far from it. In fact, dollar for dollar, breakouts with pullbacks (or throwbacks) offer the highest risk/reward possible.
In the long run, it is much more profitable to make 5 times 200 pips (total 1000 pips) with 5 breakouts with pullbacks (and risk only 50 pips) than 500 pips on one breakout with no pullback while risking 150 pips.
Personally - I agree with this somewhat. ...and the other posts above...
Especially when shorter term trading. There are usually pullbacks to a support and they will offer you a better chance to get on. Especially early on as there are very very few true V bottoms. (I usually look for a change in the price action, rather than support at a level, or a simple breakout and breakouts are usually a good sign to pay attention, as often you get a few chances at it)...but I also know sitting and waiting pays dividends for me. The more I meddle, the more I open myself up to mistakes of judgement.
But the point is still the same - once you have determined something is going to trend missing it is not an excuse.
Which is why its all ultimately a trade off - if you wait for pullbacks you will miss the boat sometimes. Accept it.
If you never want to miss the boat, you will have your own issues - accept it.
I am not saying one way is right or wrong. Its just that everything has a trade off and the OP is grappling with that obvious trade off.
If you dont accept that trade off, then you will have problems. The most obvious ones being that people chase things at the worst time.....or buy every break out expecting it to be the next big trend.
......
Backtesting with any discretion or market context will only get you so far and has it limitations, and if it was all that easy it would be set and forget the computer and these discussions would be meaningless
