Simple Inside Bars

This is a discussion on Simple Inside Bars within the Trading Journals forums, part of the Reception category; I only posted the above after reading foredog's post, but actually intinded to post an explanation of my earlier comments ...

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Old Nov 7, 2008, 1:14pm   #21
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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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inside-candles.gif  
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Old Nov 7, 2008, 2:04pm   #22
 
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foredog started this thread 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
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Old Nov 7, 2008, 2:07pm   #23
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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!
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Old Nov 7, 2008, 2:18pm   #24
 
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Quote:
Originally Posted by JTrader View Post
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!
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Old Nov 7, 2008, 3:07pm   #25
 
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foredog started this thread 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
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Old Nov 7, 2008, 4:48pm   #26
 
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foredog started this thread 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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Last edited by foredog; Nov 7, 2008 at 4:52pm. Reason: adding %
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Old Nov 7, 2008, 9:53pm   #27
 
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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?
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Old Nov 8, 2008, 11:12am   #28
 
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foredog started this thread 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.
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Old Nov 8, 2008, 2:18pm   #29
 
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Quote:
Originally Posted by foredog View Post
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.
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Old Nov 8, 2008, 2:23pm   #30
 
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Quote:
Originally Posted by options View Post
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
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