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Posted on Oct 19, 2018 at 04:33 PM
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PRICE ACTION SERIES #1: TRADING THE INSIDE BAR (IB)

This common saying, Trade the Trend, the trend is your friend! Do you believe that? Are there strategies that are trend following? Most definitely! Come with me as I take you on a journey to trading the inside bar. I’d like that you win and make profit on your trades so your trades don’t go over the bar

An inside bar is a bar (or a series of bars) that is completely contained within the range of the preceding bar, also known as the “mother bar”.

The inside bar should have a higher low and lower high than the mother bar. On a smaller time frame such as a 1 hour chart, a daily chart inside bar will sometimes look like a triangle pattern.

They are a high-probability trading strategy that provides traders with a good risk reward ratio since they typically require smaller stop losses than other setups. They are best in trending markets as breakout plays in the direction of the trend.

Momentum means STRONG movement in price both in up or down direction at a particular time. Some can say High Volume or Low Volume or Liquidity.

You can note it via indicators or price itself in the chart. In this article, we're going to use both Price and indicators to explain it.

Trend doesn't just come to the market, it's usually as a result of increase in the Volume or Liquidity that causes trend to Change or be established.

Candles too can be used as a momentum when they go consecutively in a direction. Forming higher highs and higher lows/vice versa.

RSI, Stochastic, MA are all very popular momentum indicators.

Indicators

What_Where&When

Inside Bar
How do we recognize the candle inside other momentum bars?

This particular candle must be INSIDE other Candlesticks. It's inside other momentum candlesticks.

The 3 minimum consecutive candles shows that the trend is in that direction.

Just like forecasting that the market will continue moving in a direction; first candle, second candle, third candle etc.

The INSIDE BAR will come as a small candle that is shorter in size than the third/last candle. That Inside bar can come in any candlestick shape. It doesn't matter. As long as it's not longer or equal to the Third/last candle of the consecutive candles.

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The Stop loss is very small compared to other Systems. Just behind the inside bar.

We only taking trades in the direction of the three candles because 3 consecutive candles signify trend. It maybe be 6 candles or more before you see Inside bar but don't pick any one that is less than 3.

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So how many times can one expect to get these kind of trades in a week?

it is there almost every day in different pairs hiding. You have to check different TF but don't go to 15min.

When we looking for inside bar trades, do we consider support and resistance or we completely disregard them?

This type of question depends on the TF you are looking at. If it's high TF you are trading and there's S&R in lower TF. Please place the trade. In fact, Don't respect the S&R, just follow the signal. There is no way to determine the volume of the market. The volume bars you see in your platforms shows only the volume traded via your broker!

HOW/WHEN TO TRADE THE #IB

What you are looking for is 3 Candles with HIGHER HIGHs and HIGHER LOWs.

The second thing you need to consider is to spot the IB correctly and waiting for the next candle to break above the IB. When the market is Trending, you are sure of seeing it pick any FX pair, Scan through from 30mins to Daily (D1)

It is a pure Price Action and there is no much analysis required in order to implement the system.

Just look at it from the angle of                       

  1. 5 and13 fast MA crosses which shows that the Trend is Up
  2. #INSIDE_BAR strategy to pick your Tight Entry. Even if the candle after #IB start to go above IB, we need just wait for it to come below IB and make our Entry immediately.

What is making an Inside Bar what it is, is the three consecutive candles and the one after it breaking it’s Low or High inregards to the direction of the three candles! Without those conditions the candle you point as Inside bar is a normal and useless candle just like any other... We don’t care for the size nor the color of the candle. We just care for the Highs and Lows!!!!! MA’s have to cross in order to have a valid Inside bar!!!

And what makes its valid to trade is the candle after it.

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Another name for IB is called Pullback . So, in every pull back we expect price to trade above the pull back in an uptrend and vice-versa. This type of pullback is fast and precise because it's following a momentum candlesticks. Momentum candlesticks is the Consecutive candles that established the Trend and you now see a pullback, you have enter immediately Price trade above it vice-versa.

Moreover, My favorite is the shortest IB candlesticks .The reason is that, the shorter it is, the Tighter the Stop Loss. THE QUALITY OF A SYSTEM DEPENDS UPON THE STOP LOSS

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For the Inside Bar Strategy, 3 Rules Stand out:

1. 3 or more consecutive candles in one direction

2.  MA cross, then locate Inside Bar

3. Candle stick after Inside bar must break it's High for BUY Entry or it's Low for SELL Entry.

RESULTS OF MY SIGNATURE TRADE USING THE INSIDE BAR #IB STRATEGY; PLACED ON FRIDAY AUG. 31 2018

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I told you! With more knowledge, you can make more money from your trades! Go and try using this strategy on your trades. Be sure to send me a message on the result so I can shout out to you.

Feel free to share your opinion with me in the comment section below!


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Previous Comments

  • OSEMU
      Oct 25, 2018 at 08:00 AM

    How do you exit the trade, how do we determine take profit point?

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