Nicodemus, Wait for a retracement or consolidation... After getting your retracement (or consolidation) how do you determine when to take a shot. In other words, is the retracement just a temporary pullback, or maybe just a consolidation for the rest of the day, or maybe even the prelude to a collapse. If you buy during the retracement (anticipating the resumption of the move upward) your money is tied up, you risk further pullback during the retracement, you risk collapse, and even if you let it "time" out for breakeven you've lost the commission. If, instead, you wait for the breakout you risk chasing and not catching it, or catching it and having it be a false breakout because everyone else was watching the same retracement as you so they faded it, etc. I know there's no holy grail answer, but I think it's an important topic for conversation as retracements and pullbacks on charts really look easiest at the end of the day when you're reviewing things and saying to yourself, I should have gotten in right there!
First of all I'm trading on a 5 min timeframe. I buy retracements when they approach the 20 ma or resistence/support lines that I have configured on my charts. When one bar makes a higher low and the next bar takes out the high that bar, I enter. Vice/versa for shorts. Of course your wrong a lot but by waiting for this formation, my risk is minimal with a stop below the low bar.Consolidation is another matter. That is simply monitoring the price action until I get a "feel" for where its going. Fortunately that "feel" seems to be getting better all the time. .
Nicodemus, Consolidation is another matter... Amen to that. Have tried a variety of approaches, various ma's on various time-frames coming up to meet the price, can't seem to get any consistency. For longs I've also tried buy-stops above the high of the consolidation, but they often get taken out on a false breakout (as everyone else knows the high and will pop it up to get a little liquidiy to sell into). I play retracements very similar to you, preferring price support over ma when possible. Sometimes I'll tighten up the stop a bit more than you, just below the breakout bar.
Magna I don't think there is a good "mechanical" approach to trading consolidations. I alway try to anticipate the break by, as I said, watching the price action and enter near the bottom of the range for a break up and vice versa for a break down, to give me that little bit of cushion to test the break with. Naturally I keep an extremely tight stop on these kinds of entries. I should mention that I'm trading QQQ most of the time. I wouldnt try this with a volatile stock.