jwlee7ucla:
Hey golden, as someone has pointed out, S/D lines for trading against the trend is commonly breached. And in the big scheme of things, if there is a downtrend, it means its heading down. Whether or not there is a particular retracement at a specific s/d level is negligible, because it is NOT ALWAYS THERE. If 100% of the time there is a retracement, then your strategy is good. But because its not, everytime you trade against the trend, chances are you will get burned unless you find a very very significant S/D level (so your chances of failing is less likely). I used to try and trade against the trend like you hunting for reversals, but I have found it much more profitable to use the retracements as a way to re-enter the existing trend at a better price (it tends to travel farther for more pips too).
Well said jwl, I will add that retracements are excellent points for pyramiding in the trend direction. Also some treat s/r lines as absolute, they are not, they fail under various market conditions. That is why we have stops :5:
The Ever Observant VIPER