In the picture below, it appears that the trader will be taking a long position at the entry order. What is the purpose of the stop loss in this scenario?
Looks to me that it will be a short position, not a long position. The stop loss is there in case it retraces past support and decides to keep going long. That’s how I see it.
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This looks like an example of a “breakdown” or “breakout to the downside”.
It assumes that if price can fall below the support level, you woould enter short.
Your stop loss would then be placed above the previous-support-now-turned-resistance level.
Asssuming a valid breakdown, price should not rise back up since once it gets near the new resistance level, other traders who missed the initial breakdown would then also short, pushing price back down.
What is your opinion?? Because the name of the post is “STOP LOSS / ENTRY ORDER ON BOUNCE”
I don’t see a bounce I see a breakdown of support and without trade history, IE down trend, range market, there is no way of determining what that market will do without some sort of price action.
Blackduck