Nice thread. Not sure I can offer much, but I would share my view on a couple of your premises with which I do not totally agree and how it has helped me with PA. You believe: "Price action is random" and you also ask: "One of my questions was why does price sometimes bounce off of certain S/R levels but other times go right through it." My view, which, once accepted, has relieved me from the chore of seeking the "holy grail" on how to identify which s/r will hold or not, is accepting that there are many things that drive price movement. In simplest terms, lets just say that news items, government actions, military actions, etc. move the markets. These big movers trigger trades of massive size and it is pretty much a tidal wave until one side is depleted. During these events TA and PA are pretty much useless and people who do not recognize the environment and still try to apply them conclude that the market is "random". When the influence of those tsunami type events fades, then the structure resulting from the placement of stops, targets, etc. become more prevalent, and s/r levels are honored more often as they only represent where entry/exits/stops occur. Basic human fear/greed instincts are constant. On the other extreme. When there is total lack of direction TA and PA also do not work, because you see only the small plalyers jumping onto setups which receive no support due to some pending uncertainity in the market keeping the larger players out. Just the novice traders and guys running stops playing then. Usually setting up a range. Again, an environment to avoid. I hope this did not violate any of your posting conditions, but the concept has helped me.
The application of multiple timeframes is paramount as it gives you hints as to how you should adapt to the price action or price action changes at hand.
All the work is done for you, learn price action here http://priceactiontradingsystem.com/ You think the key is to know when price is reversing, but reversal is just one kind of trade. Best trades are going with price not against price.
Here's my attempt to interpret things, using a 15 minute chart and only RTH. First of all, the general context given by the daily chart is bullish. We've been in a strong uptrend since 4/19. Looking at the 15 minute chart, we can identify a trading range roughly bounded by 1645 and 1660 which lasted from Tuesday through Friday. Price tended to stay in the upper part of the range. When price approached the lower part of the range, buying quickly came in that pushed it right back up. This is also bullish. On Friday, we had a gap up and price stayed above the gap. More bullishness. As the day went on, a rough pennant was formed. Now, since the trend on the daily chart is bullish, the activity in the trading range is bullish, and there is a bullish intraday pattern in place, we would expect price to break out of the pennant to the upside. Also, a bullish breakout of a pattern formed near the top of a trading range bodes well for an upside breakout from the trading range (this is an idea I got from Schwager). The breakout from the trading range ended up taking place. This is all looking at things in hindsight, of course, but I think that one possible conclusion from it is that given the context, going long when price moved up out of the pennant was a high probability trade.
Could you share how you define whether you will follow, fade or do nothing when a signal coma out ? My experience is it is easy to say in hind side that you should follow, fade or do nothing. In reality, it is difficult. You can argue you can make the "high probability" statistical decision based on on the historical data, however, there is still no way you can tell if the "historical" trend is in the end or not, and the new trend may be form as soon as you put in your trade. 100% agree with the commission and slippage part.
Here's an ET link to an excellent thread on VSA. http://www.elitetrader.com/vb/showthread.php?s=&threadid=108364&perpage=6&highlight=vsa&pagenumber=1 I've been around these parts for a loonng time. As I mentioned, I recommend VSA as a foundation of knowledge for PA. Traders choice to branch off or move away. Understand what it is and how it applies to your aspirations before deciding. Trade On!
Let's look at those touches of ORH as support on the 5 second chart and see if there is anything suggesting that price would bounce off of it the first two times but not the third time. Here are the first two times it hit the ORH.