Mechanical Wrong Point

The mechanical wrong point is not a price that looks good or provides a comfortable number of pips of room. It is the level at which the expansion, breakout, or rejection thesis is mechanically falsified — where the behavior that justified the trade is no longer present. For an upward expansion: the level at which significant overlap with prior territory would occur, or at which a meaningful low within the expansion would be broken. For a breakout: the mid-range of the prior acceptance. The stop goes at the mechanical wrong point because that is the only place that answers the right question: at what point does the market tell you that your read was wrong?