Cool. The only problem with your attached pic is that while you have drawn ascending support and resistance lines, at the time those trades were being made, the Support and Resistance channels could not have been drawn yet.
Your textual comment and the three comments on the chart you attached are very common viewpoints and they do a good job backing up the issues you first inquired about. Again, I feel it is very difficult for anyone to consider changing their orientation. You feel that at the point in the illustration where the loses you show a person having (pink) that it is not possible to be in a trade (short as I annotated) because of the beliefs a person on your side of the discussion holds. My view is that to trade profitably all the time, that it can be done by beginners, advanced beginners and beginners who can discern "internals" (orange boxes) either manually or using an ATS. I tried to make a horizontally oriented point. The trend shown by the boundaries was established by a pair of traverses (First a dominant and second a non dominant). Dominant traverses are traverses that go with trends (the outer heavy green boundary) Traverses are built of the OP's coding (or if manually by the mental logic of the coding) AND orange boxes (internals). In your example only the last traverse showed part of an orange box. Dominant trends are largely adjacent trending bars or bars occasionally interupted by a box. To have the heavy green boundaries we need to see a dominat traverse unfold then a non dominant traverse unfold next. As this happens we are in the market making money from the first bar to the present bar, taking profits occassionally as each traverse ends. To trade each traverse a leading indicator of price is used. This is missing from your chart. BY adding it an annotating it manually or coding it into an ATS, the trader knows what is going on. So with regard to your text comment, two trades (the long trade: the long yellow diagonal followed by the short trade: long pink diagonal) are taken and at that point the heavy green right and left boundaries are drawn in (you refer to them in up and down lingo as: ascending support and resistance lines. Taking two profitable traverse trades lets you make money, then the right and left trend lines are established as the container of the long and short trades taken, both profitable. On the chart, you note: "At the time the system was entering at the yellow and pink lines I drew we didn't know it was in an uptrend" At that time one trade had been completed A long on the dominant traverse) and a short position was underway (A short on the non dominant traverse). The short would continue until a signal from the leading indicator of price pronounced a REVERSAL was at hand and the HOLD period of the short was ending. You also noted: "At this point your channel could not have been drawn yet all those losing trades would have been taken." All through the time and bars after the first trade ended, a short position was being held because of the non dominant and the scripts for patterns being held through. This brings up a point that is oft mentioned in Price Action only trading. (See page 3 and 4 of the 68 page AHG paper) for either long or short trades when the trader does not know what is going on, sidelining is the recommneded course of action. A lot of the time such PA traders are sidelined as may be seen in threads on PA trading. Here the OP advanced staying in all the time and using 2 bars to determine the trading. You show the yellow and pink response to the OP and I suggest how to stay in all the time and make profits all the time. I am suggesting a compromise tilted towards making more money. The alternative to my suggestions so far is making more money after more skills aree added. My first proffered principle was looking at the market horizontally and bounding it on the right (this is referred to as a Trend Line by CW)and left. My second principle was holding through internals and just trading the traverses of the boundary. Here I have added that knowing when a traverse is ending and the next is beginning is done with a leading indicator of price. This means each trade lasts many bars and each consecutive trade makes a profit. This is an anti whipsaw approach to trading. Finally, you noted: "Price at this time could easily have gone down." It was certain that price was going down. By treating a box as a bar and using the OP's rules it is established that a short traverse is under way from the moment of the REVERSAL into the short at the END of the long trade. During this time the HOLD continues until the end of the traverse is signalled by the leading indicator of price. As a person logs his market observations, he is always capable of writing in just what is going on bar by bar. I do about four landscape pages of logging daily using 5 min trading bars and a host of other ancillary degrees of freedom. On the chart, at the level of trading where the trader always "knows he knows" two trades are on the table. When a trader locks in to this level of understanding, then, after acclimating at this level of profits and adding contracts, he is then ready to pursue the questions that, logically, come to mind. In the AHG PA treatise we saw how sidelining became the principle of choice in a vertically oriented up and down orientation. The yellow pink alternatives represent moving away and toward the TRENDLINE. One direction is dominant and the other is non dominant. When this shows up in the space a trader is becoming neutrally biased. When a trader adopts a neutral bias, then his rules set becomes simpler and simpler and simpler. He is using the same template over and over on a set of fractals that form shells about one another. As is easily seen in many threads, it is very difficult for a person who is differentiated vertically to become neutrallu biased. And it is much more easy for a a horizontally biased person to go through the 6 to 8 skill levels to become and expert trader. There is a long littany of vertically oriented fears and anxieties. I only trade mornings I can't trade chop I set profit targets for the day and quit when I get the target. If I am having a bad time I sideline. If I am losing money I cut the size of my trades. I can't keep my discipline I have several trading plans and I switch when one of them craps out on me. All the above are the blame game and they are based on a certically differentiated mind as a consequence of having beliefs.
lj....hit it right on the head...traders that have a true edge wouldn't dare reveal it for free because then how are we gona eat? Asking a trader for his edge is like asking a man to fuck his wife. Ironfist, I can however leave you two hints: you are not trading charts, you are trading against the enemy (i.e., other traders), and 10% of the traders get rich off of the backs of the other 90%. Do what you will with that info.
For 1 min EURUSD over the past year it works sort of. For one year on the ES it loses huge. You can play and optimize the rest of your life and get nowhere. Works great on 15m ES but not at all on 5 min ES, how good is that? Is that ESZ08 or @ES (which isn't real)?? Maybe 23 trades over the last year on an hourly chart, so watch it for 15 years to see if it really works....This is the story of mechanical systems more often than not. Nonsense.
Actually, all you've said so far indicates that you've got an awful lot of learning ahead of you. The core concept of this system is quite sound, in fact, incredibly sound. But, the heavy lifting is in extracting a viable edge due to friction costs inherent in the FX spot market. For the average retail trader this system is a path to ruin due to those friction costs, but for a well-capitalized trader with the appropriate trading infrastructure it could be quite the money maker. Here's two more looks at this. This first one uses the fractional PIP pricing that TradeStation allows for.