I have just finished reading "The New Sell & Sell Short" by Alexander Elder. In this book he discusses that one of the most bullish signals is a false break to the downside accompanied by divergence (he uses the MACD and "Force Index"). Obviously the reverse is true for bearish signals.
He said that most amateurs will automatically enter on a break above resistance and below support only to see it reverse on a false breakout.
This has been one of the most difficult questions for me to answer as a beginner: when to buy on the initial breakout and when to wait for confirmation of a break. Obviously things like volume and divergence can help but I'm still very much trying to get a "feel" for this.
Stop Loss Placement
Alexander Elder also discussed the placement of a stop loss around these market lows/highs. He says that amateurs place a stop 1 tick below the recent low. He said that there are very predictably many stops there and:
1. Slippage is an issue
2. There are very often false breakouts before price reverses again
So he says 1 tick below the low is not something professionals do.
I don't have any particular question in this post but it would be good to open up a discussion on these points to see if they align with the views of Alexander Elder.