I am re-reading the book, and I am not sure I understand the following correctly. It’s in page 52, last paragraph.
But we enter short on the third day as we break down again. This trade has no five-day condition so there is no opportunity for the rejection rule to come into play. So we get short and use the last-bar technique as our initial stop loss. We never get stopped out so we shift from using the last bar to the 20-day high near the beginning of November when the 20-day high finally moves to below the level of the last bar. But before that, we get another breakdown in the middle of October.
There is a five-day condition in place so there is a potential rejection rule. However, prices slam lower and the rejection rule is never triggered. But it does cause a new lower last bar, which could become our new stop loss but I prefer to use the 20-day high.
Does it mean that there are 2 trades here (the first opened at the beginning of October, and the second in the middle of October)? Or it is just one trade, and if the channel goes flat for more than 5 bars and then breakdown, we need to use the rejection rule as if a new trade is just opened?
Thank you very much.