Inside bar trading strategies

This is not a mere chart analysis technique but the entire system for defining the possible future price movement direction. In this article, we will look at the Inside Bar pattern in details and develop an EA for tracking the Inside Bar and performing trades based on the pattern.

At first glance, the method may seem rather complicated but actually this is not the case. The method is gaining popularity from year to year, since its advantages are evident, for example, when compared to the methods involving technical indicators. Inside Bar is a bar having its body and wicks contained entirely within the range of the previous mother bar. The inside bar's High lies lower and Low is located higher than the mother bar's ones.

Mother and inside bars form a pattern considered to be a potential entry signal.

Price Action Strategies

Keeping all this in mind, let's try to define a genuine inside bar. On the above chart, we can see that a bullish bar was formed after the sharp downward movement. However, the bar lies completely within the boundaries of the previous one.

The pattern is confirmed by the fact that it is formed at the support level. The third confirmation is the absence of flat. Since the pattern satisfies the rules, it can be considered genuine. So, we have found a genuine inside bar on the chart Fig. How should we enter the market and where should we set our stop orders? Let's examine the Figure 4. Setting Buy Stop and stop orders. First, we should consider the stop level setting rules using the example above:.

1. What is an Inside Bar, Anyway?.
2. What Exactly is An Inside Bar??
3. profi forex broker.
4. Inside Bar Pattern - 6 Characteristics of a Profitable Setup.

Setting Sell Stop and stop orders. Now that we know all the necessary rules of defining a genuine inside bar, entering the market and setting stop orders, we can finally implement the appropriate Expert Advisor that will trade using the Inside Bar pattern. Open MetaEditor from the MetaTrader 4 terminal and create a new Expert Advisor I believe, I do not have to dwell upon this, since the website provides plenty of information on how to create an Expert Advisor.

All parameters are left blank at this stage. You can name them whatever you like.

The resulting code will look as follows:. After we have created the EA, we need to define an inside bar after a candle is closed.

1. The Inside Bar Trading Strategy Guide.
2. freelance forex writer;
3. Sentiment behind the inside bar.
4. forex trading platforms singapore.

To do this, we introduce new variables and assign values to them. See the code below:. In most cases, this pattern occurs as a continuation formation. Bearing in mind its structure, the Inside Bar Formation occurs quite often in the market. We can easily spot this pattern in the Bitcoin daily chart. As a first step, it is important to analyze the prevailing trend in the market. We see in the chart below that there is a clear downtrend in place as the price action moves lower in quite a decisive manner.

Secondly, try to locate a two-bar pattern that resembles the aforementioned structure. On the first occasion, Bitcoin hints it wants to recover strongly as it erupts higher. However, the inside bar signals that there is indecisiveness amongst traders as there is no follow up on the initial move. Ultimately, the price continues to move lower.

The breakout occurs when the price leaves the range of consolidation. Shortly afterwards, we have a similar situation. Again, Bitcoin explodes higher to form a mother bar however, the inside bar signals a reluctance of the price action to progress above the preceding candle high. The stochastic Indicator is just specifically for identifying divergence in our third trading setup. Pullbacks happen all the time in the markets and we can utilize the Inside Bar to get into a pullback trade. To trade pullbacks, we want to first wait for the market to go above both the EMAs in an uptrend or below both the EMAs in a downtrend….

Support and resistance levels are places where the market can potentially reverse because of a strong opposing buying or selling pressure.

What is an Inside Bar?

On the right-hand side of the chart, the market went above the two EMAs and tested the resistance level. If so, we simply place our Buy Stop Order and Stop Loss according to the entry that is right for the trade. As mentioned earlier, straddling means to place both a buy and sell order above and below the Inside Bar respectively. If it goes the other way instead and it did work if we traded the other direction, then just move on to another trade.

We want to see the market generally trending down and forming either a double bottom or a lower low. Then when the Inside Bar is formed, we want to see that the stochastic indicator is showing a higher low for divergence. Similar to any other candlestick patterns, we do not enter into a trade just because you see a bullish or bearish candlestick pattern. Rather, you look for the specific trade setup, then see if the right candlestick pattern forms to give you an entry signal. And if you trade them accordingly with the right setups, then it can give you high probability trades. By reading this guide, you should now know exactly when to trade Inside Bars and when to avoid it.

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Additional menu. It will bounce off with great velocity. And as we all know, breakouts mean you can hit your profit target faster. Because if it were, everyone just has to trade Inside Bars and they would be profitable right? An Inside Bar is a candlestick that is formed within the high and low of the previous bar. Hence the name. This is a two-candlestick pattern formation. The Inside Bar does not necessarily have to look like the one in the picture above. Now, there are a few names for this previous bar. Like I mentioned at the beginning of this guide, an Inside Bar is like a spring.

So it is a sign that the market might be about to breakout. To give you a better understanding of this, you need to understand how an Inside Bar is formed. You can see in the chart above, the candlesticks in the red box form the Previous Bar. And the candlesticks in the green box form the Inside Bar.

The formation of the Inside Bar above is pretty much just a retracement on the 1-hour chart. You do NOT want to trade any candlestick pattern by itself. Candlestick patterns are not trade setups. That means you do not go Long or Short purely on see any candlestick pattern.