I've spent my entire trading career trying to tighten up the stop....as have most of us I think...The only way to tighten up stops is to go to a much smaller time frame and that is problematic as it can cut you up or you can take much deeper pull backs.

Here's what I mean....Assume you are entering a long trend on a pull back....however you define that, and you get in and for me, I have traded with the assumption that the bottom of that pull back is the NEW swing or higher low.....and I have put my stop a few ticks below that level. This works enough that it reinforces the idea that its the correct thing to do.....however, that is NOT the new higher low UNTIL a new higher high is put in and then its only broken to the down side IF a bar CLOSES below it....this makes break out trades that much clearer....the swing is established.....and you know where the stop goes....

In fact, the correct swing is in fact the most recent one actually established....NOT the one I thought was just created....its still not real yet.....it must be validated by a new higher high......

So this creates a problem....the risk just got bigger for trend continuation trades but in truth a whole lot safer....why? Because now the stop is in the correct location and the trade can breath as it were and those long wicks that penetrate the level I THOUGHT was the new swing wont get me.....

Now this is particularly true if holding for larger moves.....for scalping or perhaps a better word is swing scalping, taking ticks out of each swing and waiting for a new one, this may not be as important but for sure it applies on the larger trade attempts.....

It also demands two more things....1. Proper sizing for the risk....dont screw this up. 2. It also demands I look for trades in locations I would otherwise have placed a stop....in other words, as close to the deepest pull back as possible......and do so without confirmation.....this just got a lot more uncomfortable....I like confirmation and I'm not even Catholic!

This also opened up two possibilities about taking profit....scalping now becomes a legit endeavor....I know why and where to take profit....the swings themselves are good exits locations at or near the highs of the swings....and it also says that if I feel like the trade is worth holding, I know where to put the stops and to walk away....

Chart attached for a visual.....

[IMG]http://content.screencast.com/users/aztrader9/folders/Jing/media/32512e30-82ba-463b-9f18-90c8fc2629fa/2012-04-26_1538.png[/IMG]

[IMG]http://content.screencast.com/users/aztrader9/folders/Jing/media/a3b2bb62-12fa-4ec0-8773-daffa882b7c0/2012-04-26_1635.png[/IMG]

Actually, if you look carefully, it did make a HH (not very significant, but I pay close attention to detail).

I would not recommend taking breakout bars as the best strategy as most breakouts fail (as tempting as they are ).

I'll give you that........but it didn't break the previous support now resistance line either.....coin flip perhaps

The problem with that trade (real time, not hindsight) is that CL is in range and you are taking a trade in the middle. And that's a contextual trading mistake (regardless of outcome bias).