It is also obvious that bounces may occur from support or resistance levels on lower time frames that may cause a bounce towards the SL of our positions and therefore make us end up with a losing trade. I decided that I will move trades from now to breakeven once they reach the first significant support or resistance level in favor of the trade. This will avoid the taking of loses when the market simply bounces of one of this levels towards the SL before reaching our TP which is likely set at a much higher/lower resistance/support level target.
The last thing I wanted to tell you, which is probably the most important aspect I have discovered about S&R trading which is perfectly in line with sound trading principles is that you should NOT trade breakouts of S&R levels. I have found that bounces are the best to trade and the best trades are bounces from S or R levels that end up with a position in favor of the trend. This way you enter the trend at the end of a retracement and therefore with a much more favorable profit potential. I realized that entering on breakouts is usually a bad idea since price seems to bounce from these levels, sometimes a lot, before continuing the trend. So for example, if the EUR/USD has a resistance level at 1.5150, you will not enter on a breakout of 1.5150 but you will enter on a test of a support level that results from a bounce from that support level.
As the images above show you, you should enter trades on the blue circles, NOT on the red circles. Entering bounces that end up in the direction of the main trend is always the most favorable case. You should definitely avoid entering breakouts as this type of trades generally does NOT offer the best risk to reward ratio and often takes out your SL as price bounces off the support or resistance level. Hopefully this guidelines will help anyone wishing to trade this S&R system, of particular importance is to trade this on Renko charts which offer a crystal clear view of support and resistance levels.
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