I have been researching this particular aspect of trading for some time and would be interested in having ET members' opinion and suggestions on the subject. For the purpose of this discussion we assume the trader is taking a long position but the arguments are equally valid for short positions. The question is this. Assume you have identified an up trend and aim to trade in the direction of the trend. a) Would you enter the trade on a pull back and use a recent low as your stop guide or b) would you wait for a pull back and then enter the trade on a new high and use the recent pull back low as a stop? a) If the trend is going to continue, (a) had the advange becuase you can buy at a a more favorable price and you can limit your risk because your stop can be tighter. The disadvantage is that you may not get the pull back you are waiting for and the market may continue to make new highs and you will miss the move. b) If the trend is going to continue (b) will enter the market at the new high and will not miss the move. The danger is that if the trend has ended and there is not going to be a new high you are entering a loosing trade. I do realise that trading is a stochastic process and is about a lot of what ifs. This is why I welcome the opinion of the more experienced traders as to which approach you think statistically provides the better root to trade entry.