Simple Inside Bars

This is a discussion on Simple Inside Bars within the Trading Journals forums, part of the Reception category; Originally Posted by Splitlink Hi Foredog and friends, I've seen your post on PC's Forex Factory thread. I, also, have ...

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Old May 25, 2009, 3:10pm   #127
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Originally Posted by Splitlink View Post
Hi Foredog and friends,

I've seen your post on PC's Forex Factory thread. I, also, have seen your IB thread, so know that this subject interests you. Would you tell me if you do much trading with Footsie? I can't seem to get good inside bars with index trading. Wondering whether I am wasting my time and should carry on with my trend spotting routine, which gets me results. The trouble with trend following are the whipsaws, so I thought that I would study inside bars.

Most of the charts posted, though, are Forex so, maybe, IBs suit Forex better.

I couldn't see any good IBs on this morning's DAX drop, but my trend method would have caught it, I'm sure.

Regards, plit
Look for 5 minute IBs on the FTSE.

As long as you know how to draw levels it doesn't matter if the market is trending or not.
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Old May 25, 2009, 6:40pm   #128
 
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Originally Posted by Splitlink View Post
Hi Foredog and friends,

I've seen your post on PC's Forex Factory thread. I, also, have seen your IB thread, so know that this subject interests you. Would you tell me if you do much trading with Footsie? I can't seem to get good inside bars with index trading. Wondering whether I am wasting my time and should carry on with my trend spotting routine, which gets me results. The trouble with trend following are the whipsaws, so I thought that I would study inside bars.

Most of the charts posted, though, are Forex so, maybe, IBs suit Forex better.

I couldn't see any good IBs on this morning's DAX drop, but my trend method would have caught it, I'm sure.

Regards, plit
Hello Split

I've found that IB's are more rare on the hourly chart for the indices, i think this may be more due to the shorter timeframe that they mainly trade in, (eg only 8am - 1630 UK) and also that they can be influenced by both the futures an the underlying stocks so can e a bit more choppy. I have seen some on the lower time frames (15 mins or so) and you just need to be picky.

Saying that I'm sure there are some on the hourly and you just need to watch for the good one's.

I was trying to trade these on individual FTSE stocks, but the combination of the choppiness and the low volume made them more difficult to trade.

I think this method can work on any market it's just that some markets will have more opportunities than others.
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Old May 25, 2009, 9:52pm   #129
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Thanks for the answers, I'll keep concentrating on this. Rawrschach got me to look 5' and that showed a result on the Dax. There was an inside before the open. If I'd seen and taken it the profit would have been fantastic!

I didn't, though.
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Old May 25, 2009, 10:34pm   #130
 
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Split,

You have just illustrated the main situation in which I'll use an inside bar - when it fails.

A failure is a much better trade than a simple success because you get a following who shorted that bar when it broke below and then have to chuck up when it breaks back above adding to the group who were looking to go long.

Note also that on a lower timeframe such a failure will look like a test-retest as a double bottom of some form.
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Old May 26, 2009, 9:25am   #131
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I agree with nine.
A failed breakout out is the safest trade to take. If the breakout of what I call the holding bar - HB (i.e. the bar /candle prior to the inside bar whose high / low contains the inside bar - IB) is a failed reversal in the context of a strong trend, then this becomes a very strong trend continuation signal. An aggressive trader could enter at this point and not wait for price to breakout at the other end of the pattern.

An addition note on stops. The most obvious place to put a stop is at the other end of either the inside bar itself or the HB. If the breakout fails and price closes back inside the high / low of the HB, close your position immediately as it's highly likely that price will breakout at the other end of the HB. Why wait for that to happen and incur a bigger loss? There is an argument even to stop and reverse if all your other signals confirm such a move.

The attached chart illustrates the point.
1. The breakout above both the IB and the HB fails and price closes back 'inside' the high / low ranges of both bars. Anyone who had gone long on the breakout would do well to close their position at the close of the failed bar (red arrow) and / or consider going short.
2. Same pattern in reverse. Traders wanting to join the trend down will have shorted on the breakdown, only to see price close back inside the high / low range of the HB. It's probable that price will now go in the other direction, so best to close the short and consider going long. In this case, anyone doing this is likely to have been stopped out 2 candles later by the pin bar. Note however, that prices never close below the low of the HB. I maintain that it's the HB that's the really significant bar of the pattern and NOT the IB itself.
3. Same pattern. In this case, the long pin bar is fishing for all those poor suckers who shorted as price broke below the key RN at 3500. There's no volume on this chart, but I wouldn't mind betting that the volume on the huge bull candle that followed was equally as impressive as the candle itself as huge buying pressure gobbled up limited supply.
4. This early trend continuation signal failed initially, before price eventually continued up. However, the IB trader could still have grabbed 100 points or, at the very least, raised their stop to b/e.
I've just picked out some examples here to illustrate the failed signal. Look through the chart and you'll see plenty of others that worked just fine.
Tim.
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Old May 26, 2009, 9:34am   #132
 
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An addition note on stops. The most obvious place to put a stop is at the other end of either the inside bar itself or the HB. If the breakout fails and price closes back inside the high / low of the HB, close your position immediately as it's highly likely that price will breakout at the other end of the HB. Why wait for that to happen and incur a bigger loss? There is an argument even to stop and reverse if all your other signals confirm such a move.
Agreed Tim

For this thread i was showing a simple system which would require minimal maintainence eg set and leave and monitor once an hour.

BUT

For most of my trading i will have my stop above/below the IB but once it has broken out by a decent amout then i will quickly cut if it pulls back past my entry. As you say the best IB's are generally the ones that have a strong move away from entry from the begining so with the others the i just try to mange the trade away from a loss.
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Old May 26, 2009, 11:10am   #133
 
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Timsk: RN=?

Thanks,
Mike
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