Simple Inside Bars

There is a lot of talk of risk reward and different strategies so i am going to attempt to demo trade a simple system on the GBPUSD over the next few weeks.

I will trade the break of a 1hr Inside bar in the direction of the day (chosen by taking the open of the 6am Uk time candle) with an entry by stop loss 4pips outside the bar and my stop 4 points the other side of the bar.

I will then check every hour and if a bar makes a new high i will move my stop to 50% difference from this candle and my previous stop and my exit will either be stop hit or signal in other direction.

I will try and record it here and also on a blog A SIMPLE TRADING SYSTEM

I will start with a fictional $10000 and risk 3%

Sounds good and robust mate.

Toby Crabel wrote a book about such patterns - Day Trading With Short Term Price Patterns and Opening Range Breakout -, then regretted that he ever did it - which explains the current prices of out-of-print examples lol - as he is now running his own billion dollar hedge fund

Best of luck !!!

I'll be following this with interest. I've been looking for a relatively stress free system for some time

Somebody was asking what an inside bar is yesterday, so may I be so free as to offer a quick primer so everybody knows whats what as we proceed.

Inside Bar Reversal

And Crabels take on them:

A classic on the subject, Toby Crabel's Day Trading with Short Term Price Patterns and Opening Range Breakouts, investigates how expanding candle and bar patterns characterize momentum in many commodities and indices. The emotional crowd provides fuel as bar range stretches in the direction of the prevailing trend. Finally, a climax bar prints a sharp reversal under surging volume.

It's excellent stuff totally aligned with the way markets work, and I'm looking forward to foredogs trading this as well.

Hi foredog,
I use inside bars and have studied them for quite a while - but only in the context of U.S. equities and not FX. A couple of things that you might like consider:
1. As a rule (and there are exceptions) I trade the breakout of the bar / candle prior to the inside bar - what I call the 'holding bar'. Breach of the high / low bar is more significant than the breach of the high / low of the inside bar because it signifies either that the trend is continuing or that a possible reversal is underway. Price activity 'inside' the holding bar denotes indecision and relative parity on the part of buyers and sellers.
2. If price breaks out above / below the holding bar and then returns to close back inside it - exit the trade, don't wait for your stop to be hit. This is usually a sign of a false breakout. If price then moves to the other end of the holing bar and breaks out there - then this is a much stronger signal than the first one.
3. Add a very tight moving average to your charts - I recommend the 5 period weighted moving average (5WMA). The best (long) trades will be the ones where price breaks above the holding bar but is also VERY close to the 5WMA. Look at the average bar length (regardless of timeframe). Don't take any trades where price is more than half a bar away from the 5WMA when the trade is triggered. This is tops - less is preferable. The reason for this is that price rarely deviates very far for very long from the 5WMA and if it's already a long way above it when you enter, the probability of a successful trade is greatly reduced as price will - likely as not - 'return' to the 5WMA. Vice versa for shorts.
I'll happily post charts to illustrate the above if it's not clear - but I've no time just now.
Good luck!
Tim.

Potentialy one setting up for 1300,

11am range 15850 - 16049

12 range 15945 - 16045 (so far), if this remains the same i will place my order at 16049, stop 15941

Thanks Tim.

At the moment i'm trying to keep this as simple as possible so even a child could do it.

I'll try and post charts as and when.

I have been thinking about looking into these to add to my Arsenal. My thought at the moment is that I would like to see both bars having a high-low less than the timeframe ATR.

Anybody use this as a caveat to their signal?

Orders placed, lets wait and see, i will cancel them in an hour if not triggered and we'll look again.

I have placed the order to buy 2.75 mini contracts at 160.49, stop at 159.41 (not sure if ig will let me trade odd sizes, time will tell, if not i would be inclined to adjust the siz to 3)

A/c $10000

Risk 3% $300

300 / 108 = 2.777777777777

Now it's just waiting

order cancelled, cable has traded below our stop so we'll wait for a better opportunity

Obviously the price went through our limit and powered on up after we cancelled the order but the idea of this is low risk entries and after trading below our stop and failing to break the high in the hour i felt the IB was invalidated.

some may disagree but we haven't lost anything, just failed to gain, tomorrow is another day.

foredog said:

Obviously the price went through our limit and powered on up after we cancelled the order but the idea of this is low risk entries and after trading below our stop and failing to break the high in the hour i felt the IB was invalidated.

some may disagree but we haven't lost anything, just failed to gain, tomorrow is another day.

Click to expand...

Some sites \i posted on an earlier thread re - inside bars etc.


Below is a selection of PIN BAR, Inside Bar and other Price Action trading styles.
Enjoy:

The DIBS Method . . . No Free Lunch continues

Neil

Cheers Neil

If it was about 6 months ago then this was where the idea came from, i was already using inside bars but that thread gave me a push in the right direction, although this is still my first real foray into Forex, too busy until now!

foredog said:

Cheers Neil

If it was about 6 months ago then this was where the idea came from, i was already using inside bars but that thread gave me a push in the right direction, although this is still my first real foray into Forex, too busy until now!

Click to expand...

Hey Foredog

Nice to see an inside bar thread. Are you going to trade Cable only or will you add a few more of the major pairs? I try to watch about 6 or 7 of the bigger pairs.That said the only IB i took today was on EURCHF, first i went short, then long on the failed breakout. That has since retraced so out at be. Have you set yourself a limit on the size of the inside bar? I know soon prefer only the smaller ones as the breakout seems to be a bit more vigorous so that maybe worth considering.
Shane

BSD said:

Sounds good and robust mate.

Toby Crabel wrote a book about such patterns - Day Trading With Short Term Price Patterns and Opening Range Breakout -, then regretted that he ever did it - which explains the current prices of out-of-print examples lol - as he is now running his own billion dollar hedge fund

Best of luck !!!

Click to expand...

someone said something about looking at the second zip file on this link ...

http://forex-knowledge-strategy.blogspot.com/2008/09/ebook-forex-package-12.html

....i wouldnt know though...

Inside Out

I am taing the 6am open as my starting point for the day, which today was 15866

On my Ig charts the 6am bar only traded 2 pips more than the 5am bar, it certainly looked like one.

If i was trading this discretionary then i would probably have placed orders around this bar as the start of the London session will usually move cable one way or another, but as i am trying to follow a simple system and this wasn't an INSIDE Bar then i've let it go......

skelly22 said:

Hey Foredog

Nice to see an inside bar thread. Are you going to trade Cable only or will you add a few more of the major pairs? I try to watch about 6 or 7 of the bigger pairs.That said the only IB i took today was on EURCHF, first i went short, then long on the failed breakout. That has since retraced so out at be. Have you set yourself a limit on the size of the inside bar? I know soon prefer only the smaller ones as the breakout seems to be a bit more vigorous so that maybe worth considering.
Shane

Click to expand...

Hi Shane

At the moment i'm just doing GBPUSD, so as there's not too much to look at.

I know what you mean about the size of the Bars, i hadn't really considered that, maybe i'll have to add a rule of the bar being max x pips?

Thats the benfit of demo though, we can discover things without getting hit in the wallet!

No trades today, there have been no inside bars so far on my charts, although some were close, maybe this is a good thing with the BOE etc today.

The bars that wasn' this morning would've produced a small profit but not as much as we'd like and maybe not worth the risk........

Not quite the start i hoped for but the markets will still be here tomorrow (although another few months like October and some may not!!!!)

Thanks you all, i'd love to receive the award for dullest diary on T2W!!!

3 days in and no trades....

But i've chosen a setup that should over time produce good Risk:Reward when the correct trades are taken, this means only the right trades, not ones that are sort of Ib's but i've got a hunch etc

so at the moment the lessons are discipline and patience.

Cheers

foredog said:

. . .so at the moment the lessons are discipline and patience.

Click to expand...

These are always the lessons - each day - and not to trade when there are distractions around. Yesterday, I had builders in the house and I briefed them before the market opened. An hour and a half in, I take my first (long) trade. A minute later, there's a knock at the door, the builder has a question. I quickly put on a stop order and go and sort the builder out. I return 2 minutes later to find my stop has been hit. Only problem is I placed a stop buy order instead of a stop sell order, so I'm still in the trade but at twice the correct size and price is going against me. I close immediately for a loss 4 times greater than it should have been. All because a builder wanted to know where I wanted a towel rail in the bathroom! I'm not blaming the builder (who's a very nice chap) - it's my own stupid fault. Very embarrassing too, so I don't really know why I'm posting for all to read here. I guess I hope that someone might learn from my expensive and incredibly stupid, kindergarten mistake!

Tim.