They do look so wonderfully prescient after the fact, don't they? Like Al Brooks and his H1, H2, H3, H4 entries.
Quite the contrary my friend. You study the CL contract. Tell me, what % of pullbacks to the 23.6% level hold and move sufficiently in the original direction to provide at least 2.5:1 R:R? For those that move just a little past the 23.6% level and then reverse, how many ticks stop loss would allow for 95% of those excursions to be traded profitably? Of those that do not hold at the 23.6% level, what % of pullbacks to the 38.2% level hold and move sufficiently in the original direction to provide a R:R sufficient to cover your previous 1 R loss and the need to make enough this time? Sorry, ordinarily I would start calculating this return but it's my Friday night of sorts and I've started on the beer, so I'll just take it you have this covered. Do factor in that it is not purely 1R to cover, you could be whipsawed more than once before it hits 38.2%. Again also, the stop loss question. Repeat for 50%, 61.8% etc. Do you see what I am getting at? Without this information on which to base my decisions, I might as well check my horoscope for the day and if it says I will make money, go for broke. After all, there's only a 50% chance the horoscope is wrong, and WOW, that means I have a 50% chance of making money.
Fair enough, do you need me to reverse the logic for breakouts? Define your trading style and I will pose the question. Same logic.
Don't confuse a desire to understand why the market behaved the way it did with a trading system. The one I'm working on has been 6 months in the making and is almost ready for forward testing. That means collecting and analysing all the metrics I mentioned earlier.