Oh boy, where do I start. The short answer is all of the above.
Actually, the current volatility of the market at the time of the "stop out" is how I gauge when and how to reverse the trade. If the market is in a slow grinding lower kinda mood, I'll just stop and reverse. If on the otherhand, the market is violent and whippy but still trending down, I'll allow myself to stop out, then immediately pop a limit order to sell back at my line. I have a very simple rule. I only play at my line. If the market is in between lines, I don't even bother looking at it - thats a sure way to get whipped out of a market as the odds are no longer in your favour. Remember, YOUR line was derived from YOUR research - you have an EDGE there, and only there. Play ONLY when you have an edge! Anything else is paramount to gambling. In my opinion, aspiring traders should be focused on studying charts and looking for consistent and repeatable patterns. It will take a lot of work, make no mistake about that! Most of the other stuff, although interesting, has little value to us small traders. In my opinion, the first step is to define your line. Spike uses forks, some use fibs, Tom and Erich S/R - which is unique, I define my S/R lines differently, other traders will define their "line in the sand" differently again. It doesn't matter, if it consistently works for YOU, then you have an edge. Once you have decided on where and how you define your line, the next step is to observe what prices do at and around your line. Do is consistently bounce off it? does it go through it and come back to it? Does it chop around it? What does it do? This is where the real work and time commitment begins. You need to observe many many many occurrances to begin to "see" what the "most likely" result will be, and as such, how to play it.
Did that help? LOL
RobT