Originally Posted by aha

Here is a SRDC V trade just happened. The rule is to enter after there is one bar formed completely outside the envelope. But in this case the trade opportunity would have gone.

Notice the red trend line in the chart, which was drawn from Friday and Monday's low. Also notice the black line on the chart, that's the support becoming resistance. If the price breaks the black line and the red line the double bottom pattern will be formed and the price mostly likely went up to the top of the channel. But it pulled back from it. You may enter from there with a small stop loss on the other side of the envelope. Or when the price open outside the envelope, if that candle move fast and crosses the third white line, you may enter immediately. Why the third line? Because it will only give you about 40 pips stop loss and in the testing it leads to win more than loss.

All these parameters were optimized through long hours of testing when it was created. When I learnt it I backtested exclusively (you may do the same), and was amazed how they were putting together and greatly reduce whipsaws.