From your comments you seem to favor moving a stop up quickly to a smaller ledge or swing rather than let a test hit an initial stop. This is in contrast to what many offer as a mantra of not moving the initial stop, until a new swing high or low has been made. Is this correct?
Here are the price action environments that I've found to be warning signs to tread carefully. When these contextual clues appear, I realize that two sides feel equally confident and a lot more defense takes place both directions. This leads to chop and narrowing consolidation and out of this environment a new strong move will eventually transpire. My job is to either watch patiently for the market to tip its hand (and this can take half an hour or sometimes over an hour to happen), or to cross-reference a shorter time frame chart to see where smaller scalping opportunities may arise. Back to back opposing bar breaks: Price swings on any given chart consist of two or more price bars that trend in a direction. If it's a smooth swing, there is no bar overlap. If price is falling for two or three bars and then the high of a down bar is broken to the upside, that signals a potential turn of direction. The key word here is potential. If the upside break fails quickly or if the very next bar breaks in the opposite direction, we have...chop. Break of a wide range bar: The break of a wide range bar in the opposite direction of the previous price move is usually not the signal of a turn of direction. It's often a nice head fake trap. Think about it: If price prints wide strong green bar, then the next bar retraces all that green and breaks the low of the green bar, what's happening on the same chart with a shorter time frame? It's a range and the initial break of a range fails more often than not. Two-leg pullback traps: When price turns following a strong directional move and retraces more than half the move with one or two strong pullback bars, and there's a key S/R level closer now than the previous swing high or low, a break of a retrace bar back in the direction of the strong directional move is frequently a two-peg pullback trap, and the journey to the key S/R level will often resume. Price closes on the opposite side of a rising or falling 20EMA: In well-defined trend, the 20-bar EMA will be clearly rising or falling. In a really strong trend price may not even pull back to it for a long time. Once price closes on the other side of it, though, it flattens the 20EMA. This is a sign of a potential trend reversal, but it doesn't usually happen quickly. Often there's a period of back and forth chop as the previous trend-following side vies for continued control against the side that's trying to take over. Initial break out of a range: The initial break out of an established range usually fails. Initial break of a symmetrical triangle: The initial break out of a symmetrical triangle usually fails in both directions. (If the range or the symmetrical triangle is very narrow, the initial breakout is usually strong.) Inside bars, outside bars and doji bars: These are simply ranges or flags on a shorter time frame chart. Since initial breaks out of ranges are prone to fail, be careful about being the first mouse to trade the break of single inside or outside bars. Initial break of a well-defined trend line (overshoot): These are nearly always fades on the initial breakout. Be the cautious second mouse who gets the cheese in such an environment. Running into the defense (âcongestion between campsâ): Price levels where a previous group of traders successfully went long or short for a decent ride will nearly always be defended if price gets all the way back to that zone. Also, channel lines, trend lines and 20-bar moving averages in a well-defined trend will nearly always be defended on the first re-visit. If you're planning to put on a trade, be sure you have enough ticks of room (airspace) between your entry and these defensive zones to escape with little damage if the defense is strong and drives price back against you. If these levels are really close together, you're dealing with congestion between the bulls and bears and this can often lead to...chop.
This thread is about dealing with potential chop situations, usually price environments where there is no clear trend, no side has clear control. In a defined trend, I believe it's best to give price a couple chances to do its thing. But in potential chop/range situations, if price can't clear the nearest defensive zone, or if price breaks out very weakly and starts back against me, I'm fairly quick to move my stop to, or close to, break even.
Since I trade oil, I can tell you exactly how I traded that chop. I trade using a 5min and 1min chart. My 5min chart looks very much like your chart, so I'll reference that. The move off the open set up as one of my chop warnings: "Back to back opposing bar breaks". As a result I had no position during the nice strong drop because there was really no setup that fit my specific trading plan. That strong selloff was a continuation of the pre-market down trend and price was heading toward a lower parallel channel line. The nearest pre-market swing low support that could become resistance in a pullback was the low of the 7:20am bar, 106.19. I placed an offer at 106.18, which was filled during the 9:20 bar. I took profit on that trade early when the lower channel line failed to draw enough sellers to it despite a few attempts, and the choppy conditions convinced me to take a break just before the 10:00 news release. If I'd been patient and held through the hour, I would've attained a full channel line target on the trade. So basically I was short previous S becomes R and I held through the first area of chop you outlined on your chart, bailing before the strong chunk of the move, but got a decent profit nonetheless. During the second area of chop outlined on your chart I didn't trade for nearly an hour because of back to back opposing bar breaks and inside bars. There was nothing for me to grab onto. Price was trading in a fairly narrow range. Finally I decided to try a long off the 1min chart range for test of the range high, but that failed to break so I scratched the trade, and I then quickly shorted off the 1min chart for a test of the range low and that one worked out.