Simple Inside Bars

I only posted the above after reading foredog's post, but actually intinded to post an explanation of my earlier comments about inside bars. I wrote this in response to an e-mail, but thought it might be of interest to others . . .

Looking at the attached chart (picked at random):
What I call the 'Holding candle' HC has a high / low of 28.58 and 23.31 respectively. To recap, the HC is the candle whose high and low are outside the high and low of the subsequent inside candle (IC). Without the HC, there is no IC. The gold line is the 5WMA that I mentioned in the earlier post. The purple lines are displaced moving averages based on ATR and provide a visual prompt as to where to take - or not take - a trade. I want to enter as tight as possible to the gold 5WMA, so I won't enter a trade if price is outside the purple lines; i.e. I won't go long if price is above the upper purple line or short if price is below the lower purple line. A long trade is indicated 3 candles after the HC, - the first red circle. (Had price fallen sharply and breached the low of the HC, I wouldn't have gone short as price is outside the lower purple line.) So, I'm long above 28.58 and price moves as expected to start with. However, it pulls back and closes at 28.50, back 'inside' the HC. This is a failed breakout and experience tells me that price is more likely to fall further than it is to rise back up in the direction of the original trade. So, I'd close right there for -8 cents (plus comm's and fills). Very often, when this happens, a good short entry would be the breach of the low of the failed breakout candle - the second circle. Stop placement is discretionary. As a starting point, I generally look to the breach of the other end of the HC. However, in this example, I'd probably have placed it around the low of the 2nd inside candle at 26.00. Please note than this example is poor as it isn't in the context of trend, market sentiment, S/R etc. which, if factored in to the trade, will increase the probability of success. E.g. - note the penultimate candle on the chart that is also a failed breakout candle. Although the HC and two subsequent IC's have highs around 31.60, the round number at 32.00 is just overhead (potential resistance) and price is close to the upper purple line, so it's not a high probability set up. However, had I taken it, I'd have set my stop at the low of the HC at 28.20, but exited when the breakout failed and price closed back inside the HC at 30.59. I'd only have lost $1.00 per share by doing this, instead of a potential $3.00 per share loss if/when price breaches the low of the HC and my stop is triggered.
Tim.
 

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Potential Setup (at last)

11am range 15702 -15815

12 range 15718 - 15815 (97 pips)

We have taken 15647 as the open so we will only look to go long.

buy stop placed at 15819 , stop at 15714 for 2.85 contracts ( $300 / 105)

will cancel order at 1400 if not filled
 
If one only looks at the candlestick pattern of simple inside bars, to make money and base entries off, they are passing up many other good opportunities to make $.
Look at a chart - be it a 5min 15min etc, and see what the high low oopen close are doing in comparison to the last candle, on the candle which marked the change in direction, and which "pattern"/trend consistently leads to profit potential.
Add a bit of S/R - Happy Days!
 
If one only looks at the candlestick pattern of simple inside bars, to make money and base entries off, they are passing up many other good opportunities to make $.
Look at a chart - be it a 5min 15min etc, and see what the high low oopen close are doing in comparison to the last candle, on the candle which marked the change in direction, and which "pattern"/trend consistently leads to profit potential.
Add a bit of S/R - Happy Days!


All true but this is just to show one simple method that is fairly easy to recognise and use.

I'm sure that if you just used this method over a few pairs then it would throw up enough signals to produce a healthy income.

Not tested that yet though!
 
We have our 1st trade..................and it could go either way!


Our order was triggered at 1320 and we went long 2.85 gbpusd at 15819, the market then chopped about before the figures came upon which it gapped down, then up and now down again.

Since our opening candle made new highs i have moved the original stop to 50% of the difference between the original stop 15714 and the low of the 1300 candle 15762 (714 -762 = 48 /2 =24) so the new stop is 15738.

This is to reduce risk becasue the market may go back to near the low of this candle so we don't want to get stopped out by a quick flock down, but if it goes much beyond this low then the rally's probably over and we want to be out and wait for the next IB.

I will monitor the trade again at 1500 and 1600, if not stopped out then it's on it's own until Monday
 
Stopped out at 15738 time 1445 for 81 pips loss or $230.85 so we've had a 2.3% loss and the account stands at $9769.15

If i had left the stop at the original point then we would still be in the trade but only time will tell if we'd have made a profit from it......

I believe the best profits will come from the trades that go on with little pull back, our job is to manage the ones where it chops around and try to minimise loss.

There's a lot of maybe's with stops, only time will tell if my 50% method is right so thankfully we're demoing this.

Have a good weekend and hopefully we'll all 'ave it off next week.
 
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Interestsing stuff and thanks for the new (to me) approach. Just outchecked the link to Amazon and the cheapest book by Toby Crabel is $550! Must be dynamite. Any other significant details on inside bars worth sharing for those of us without $500+ to spare please?
 
There was a thread on a rival forum where a chap who's been trading this sytem for years posted it, read through that, i'm basically using his idea with a few tweaks (if it's wrong to mention the site mods please delete)

It's on Forexfactory, search for the thread no free lunch or the poster PeterCrowns.
 
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%


Foredog. I would like to suggest a very simple alteration to your system if I may be so bold. You are trading the uk open on the cable. So in theory you only have one of the active sides actually taking part. Why not use the USA open, you then have both ends playing. You could even run the two open times side by side so to speak. to find out which (if any) is better suited to this methodolgy. And (I personally would also use outside bars).

I had looked at Peter Crowns method over a few months and the times it did work it was very good, but there were lots of days where nothing happened, or gave a loss trade. This way you give yourself 4 chances over one, if you also took the 2 till 3pm bar gmt time. (I think also if memory serves that he traded ANY inside bar break out from the stated start time).

I haven't even looked back through any charts yet to even see if this works, so I do apologise in advance if it's a total screw up and also for 'chocking' the 'simple' plan.

Simple works... Though it may need a tweek here and there.
 
Foredog. I would like to suggest a very simple alteration to your system if I may be so bold. You are trading the uk open on the cable. So in theory you only have one of the active sides actually taking part. Why not use the USA open, you then have both ends playing. You could even run the two open times side by side so to speak. to find out which (if any) is better suited to this methodolgy. And (I personally would also use outside bars).

I had looked at Peter Crowns method over a few months and the times it did work it was very good, but there were lots of days where nothing happened, or gave a loss trade. This way you give yourself 4 chances over one, if you also took the 2 till 3pm bar gmt time.

I haven't even looked back through any charts yet to even see if this works, so I do apologise in advance if it's a total screw up and also for 'chocking' the 'simple' plan.

Simple works... Though it may need a tweek here and there.

Great idea, I'm going to run with just the Uk for a few weeks first and then maybe look to introduce this if there's very few signals.

Thanks:clap:
 
It’s a price (action) observation that is as old as the hills.
I’m not sure how you’ll go on with triggering it off that particular chart reference, but the concept of gunning inside & outside edge bars on positive (negative) flows is a simple, effective driver. Team them up with visible support-resistance (buy/sell pressure points) & you got quite a powerful template to play with.

I work alongside a fella who has operated one of his long-range engines via a weekly/daily combo for years, with excellent risk to profit tolerances.

Example below.

One of the positives of legging in via the higher timeframe templates is you get plenty of time to weigh up the each-way odds of compounding a strong momentum play, whilst minimizing costs. You also suffer less from (fake out) 2 way intraday vibrations, which will be one of your major annoyances on that small timeframe.
Anyhow, good luck with it.

grey lines are buy/sell pressure zones
red line is the trigger off a (typical) big figure launch

10px5qf.jpg
 
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Team them up with visible support-resistance (buy/sell pressure points) & you got quite a powerful template to play with.

You also suffer less from (fake out) 2 way intraday vibrations, which will be one of your major annoyances on that small timeframe.

Keying in off the key wkly-daily (s/r) zones via his hourly frame will reduce the false starts on these inside plays, especially if they’re managed via pullback entries.

There aren’t too many on here keen to play off the larger frames on the currencies Jimmy.
 
Keying in off the key wkly-daily (s/r) zones via his hourly frame will reduce the false starts on these inside plays, especially if they’re managed via pullback entries.

They will to a certain extent sure. Thing is Anna, even via a 60min view there’s usually a whole stack of choppy 2-way flow snapping at your heels most every goddamn day.

That inside (& outside) bar kicker is a fair leg into a decent pitch off the key levels, but on the lower timeframes you’re pissing your risk up against the wall a good percentage of the time, particularly recently with the low level liquidity & patchy order flow.

I don’t see any favorable risk-cost advantage at all if you got to spend half your time re-calibrating (& financing) washed out trades?

It’s a decent piece of kit to have in your pocket, but I’m not convinced it’s a viable play on these gambling timeframes.
It’ll be interesting to see how this experiment plays out.

xeip37.jpg
 
Hi Hawkmoon,
For the benefit of those subscribers to the thread who aren't that quick on the uptake (i.e. me!), could you explain the significance of the IB's marked 'A' Vs the IB's marked 'B' on your chart please?
Cheers,
Tim.
 
Hi Hawkmoon,
For the benefit of those subscribers to the thread who aren't that quick on the uptake (i.e. me!), could you explain the significance of the IB's marked 'A' Vs the IB's marked 'B' on your chart please?

Hi Tim
He’s not around for a couple days so I’ll step in if it’s ok?

Those potential reaction zones (lines) he put up on the big frames are taken off his weekly reference chart.
They can then simply be cascaded down so they print on any timeframe reference of choice as price begins vibrating on & around the level – they’re just watch zones if you like.

What he’s getting at regards triggering a lower timeframe inside bar (or any other price action trigger come to that) is the fact you might obtain keener value or lower potential risk if you use the “much observed, obvious” reaction levels such as s/r, buy-sell pressure & big figure zones etc to execute your orders, rather than get caught in mid-stream where most of the herd tend to conduct their business.

Orders & transactions consistently get attracted to these common magnets up & down the ladder, especially big figures/key swings & highly visible levels.

By grading the set-ups & trying to execute your game plan on & around the higher potential r/r tickets (such as that s/r level he earmarked with his A grade highlighter) you just might remain seated a little longer & thus gauge the risk-profit percentage of your book as price gets flipped back & forth thru it’s supply-demand chain.

Hope that helps.
Anna-Maria.
 
What he’s getting at regards triggering a lower timeframe inside bar (or any other price action trigger come to that) is the fact you might obtain keener value or lower potential risk if you use the “much observed, obvious” reaction levels such as s/r, buy-sell pressure & big figure zones etc to execute your orders, rather than get caught in mid-stream where most of the herd tend to conduct their business.
Hi Anna,
Thanks for the reply. Allow me to summarize what (I think) you and Hawkmoon are saying. In a nutshell, look for inside bars (IB's) in a slower timeframe (T/F) - e.g. weekly bars - that appear near key S/R zones and then look to enter in a faster T/F - e.g. on a daily bar - when price pulls back to a significant zone in that T/F . Typically, I look at previous swing highs / lows, the previous day's high / low and round numbers. The specific trigger to enter the trade in the faster (1 day)T/F isn't especially important. However, what is important is that the IB has formed and been breached in the slower (1 week) T/F in the vicinity of a key area of S/R. As I day trade U.S. equities, I could reasonably substitute the weekly / daily T/F for 10 min's / 1 min' T/F respectively - or whatever. Am I along the right lines?
Thanks for your patience!
;)
Tim.
 
I don't want to make it any more complicated than it needs to be.

As per his original example Tim, the way we play that specific set up (inside/outside bar) is via the Weekly or Daily timeframe. It serves a particular purpose & is geared more toward a (trend) positional, or certainly longer-range, swing type move.

Experience tells us that attempting to trade the set-up via the lower timeframes throws up too many unacceptable risk to cost issues, for us anyway. How others leg in & out is obviously down to them.

They’re an ideal lever into compounding a move and/or averaging into a value position, especially as price triggers a continuation leg of a larger trend run, as is the case currently on EURUSD.

All he was referring to with that last hourly chart reference, highlighting the premium A grade & lower B grade signals, was that if someone was holding a gun to his head & he had to leg in via the 60min, the value ticket (risk/cost) would be to engage on or near a recognized s/r zone, executing in line with the dominant order flow….in this case, shorting the EURUSD.

There’s actually an inside week on Euro kicking events off tonight which offers another potential continuation leg in thru 1.2525.

There was one which printed 3 weeks back thru 1.3345.
They’re not so common on these larger sheets, but depending how you play them, can be very profitable in extreme (strained psychology) environments.

As with any potential trigger, regardless of the set-up, the background & relevant research info you undertake, including risk parameters etc, has to stack up in order to justify the deal.
 
Hi Anna,
Thanks for the reply.
In a nutshell, look for inside bars (IB's) in a slower timeframe e.g. weekly bars - that appear near key S/R zones and then look to enter in a faster T/F - e.g. on a daily bar - when price pulls back to a significant zone in that T/F .

As I day trade U.S. equities, I could reasonably substitute the weekly / daily T/F for 10 min's / 1 min' T/F respectively - or whatever. Am I along the right lines?

I guess it comes down to how you blend price from the various timeframe references to sit alongside your intended aims for the trade you're considering undertaking.
Your risk to cost ratio will obviously rank right up there as a major priority & if you can average your criteria into a value ticket, you're good to go.

If the Daily or Weekly trigger is outside your risk boundary, even allowing for reduced size, then I guess dropping down into a 4 hour frame might get you aboard with a little compromize on the numbers.

As mentioned previously, I personally wouldn't consider executing this type of game plan on anything lower than a Daily frame, but thats just my appetite!

It's up to you to figure out whether or not you can make it work according to your preferred timeframe tolerances, but this run thru here is the type of trigger blending I'd look at if I was seeking a compromize or reduced scaleback of the weekly-daily play....

a little wider view of where these larger s/r zones hail from on this weekly frame....

jh79c7.jpg


closer look at the weekly IB vicinity in relation to the near-term s/r zone (1.3670) & the next lower level guide @ 1.2980. The low of the IB is marked up in grey @ 1.3345.

1zoxjlg.jpg


so, we got the low of the weekly IB ticked & the near term, next line potential reaction zones tagged. Drilling down into the 4 hour sheet you can monitor the activity as it plays out on & around the weekly activity zones to gauge the flows, behavior & potential to continue the downside momentum.
Using the weekly IB as the template, you could key into a low(er) risk event by seeking out mirror behavior (inside bar) via the 4 hour frame at & around the weekly s/r reaction level.

As long as you can compute acceptable risk, reasonable next level destination & momentum potential, based on price behavior - you're good to go.

2itk74x.jpg


how you manage your ongoing risk, additional (compounding) size, whether or not you peel off profit on the way, etc etc will be directly influenced by your initial aims & expectations for the trade.

I guess a similar template could be operated on the timeframes of your choice, as long as the reasonings for triggering your decision hold water from the priority timeframe that you work your research from, all the way down to your trigger frame.

2u70zz5.jpg
 
6am open 15792 above his long, below short

Potential setup for 8am

6am bar 15671 15804

7am bar 15682 15735

Sell stop at 15678

Stoploss at 15739

4.8 lots (9679.15/3 = 293.07 / 61 = 4.804)


Market rallied up, no trade order cancelled at 9am
 
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Anna,
Thank you for your comprehensive explanation with excellently annotated charts.
(y)
Tim.
 
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