No problem. Just to be clear, this was a backtest of a 20/10 channel; it’s plausible for the 55/20 to be unprofitable during the same period. I know, not exactly “by the book,” but o990l6mh got me looking at it. From my backtesting so far, 20/10 breakouts with Smith’s rules (with the exception of ADX Filter) far outperforms 55/20.
Here’s how I’ve been applying the Rejection Rule:
We go long at the break of the 20 day high (or 55, no matter) at the first red up arrow. The market follows through nicely until selling off and chopping sideways for 10 days. On the 11th day (marked with a red X), the market breaks up through the level of the new 20 day high, but closes below it. Because we had at least a 5 day period of a flat channel (descending would count too, of course), the Rejection Rule activates, and we liquidate the position at the close for a tidy profit.
The next day, the market breaks above the high of that rejected candle, which signals another long entry. We ride it until being taken out by the 10-day low (blue dot).
Not sure if that’s any different than how others are using the Rejection Rule, but this is simply how I read it.
Placement of the Last Bar for me is completely unscientific; I simply use the last “significant” bar before the breakout. I have been noticing that this seems to be around 1x the 40-day ATR.