Simple Inside Bars

This is a discussion on Simple Inside Bars within the Trading Journals forums, part of the Reception category; There is a lot of talk of risk reward and different strategies so i am going to attempt to demo ...

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Old Nov 5, 2008, 11:16am   #1
 
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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%
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Old Nov 5, 2008, 11:19am   #2
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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 !!!

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Old Nov 5, 2008, 1:03pm   #3
 
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I'll be following this with interest. I've been looking for a relatively stress free system for some time
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Old Nov 5, 2008, 1:11pm   #4
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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.

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Old Nov 5, 2008, 1:51pm   #5
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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.
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Old Nov 5, 2008, 1:52pm   #6
 
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foredog started this thread 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
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Old Nov 5, 2008, 1:54pm   #7
 
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foredog started this thread 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.
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Old Nov 5, 2008, 1:55pm   #8
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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?
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Old Nov 5, 2008, 2:15pm   #9
 
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foredog started this thread 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
Attached Thumbnails
gbp1a.bmp  
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Last edited by foredog; Nov 5, 2008 at 2:17pm. Reason: wrong stop typed
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Old Nov 5, 2008, 3:04pm   #10
 
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foredog started this thread order cancelled, cable has traded below our stop so we'll wait for a better opportunity
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