Inside Bar Trading

[Stuart14]

Hi Guys,

Looking at Inside Bars and Pins as Trading Strategies. I can see the Strategy based around inside bars, makes sense. But then people talk about Fakeys. Fine, understand that as well, but how can you trade one without the other potentially hitting you. You cannot know the move is a fakey until it has completed?

 

[Stuart14]

For instance, EUR/JPY 4 hour chart has an inside bar forming now, unless something drastic happens in the next 17 mins. I'm long already so hope this will signal a trend change back up.

 

[foredog]

Look in the Forex systems for a link to KISS system, this is a person trading IB's

Basically though what he says is when trading 1hr Tf he will take the london open eg 6am and if the price is below will only short from IB, if price above then only go long.

To adapt this to longer Tf try the weekly open, or previous 5 trading days or something, or just look for it continue with the general trend.

 

[foredog]

http://www.trade2win.com/boards/forex-strategies-systems/33157-kiss-forex-methods.html

 

[astraura]

Hi Guys,

Looking at Inside Bars and Pins as Trading Strategies. I can see the Strategy based around inside bars, makes sense. But then people talk about Fakeys. Fine, understand that as well, but how can you trade one without the other potentially hitting you. You cannot know the move is a fakey until it has completed?

The strategy would be to go long on the breakout on a up day and trend is up as indicated by MACD or other indicators and go short on breakdown. Obviously the stop loss should be the previous bar's high or low. The threads below explains the situation aptly.

 

[foredog]

You're always going to get fakes, by taking smaller inside bar then the chance of the breakout being real is more and also if it fails there's a smaller stop, it's a % game after all

 

[4rex4life]

You can find a profitable strategy for trading inside bars from this thread

http://www.fxfisherman.com/forums/forex-metatrader/system-coding/4110-need-ea-one-best-systems-all-new-post.html

 

[shadowninja]

As stated above, it's a percentages game. A couple of weeks ago, I took 6 small losses of about 10-15 pips each and then the 7th trade was a nice 200 pip profit. Of course, I'd rather not take the 6 losses in a row but if I only took one then gave up for the day, I'd have been in a loss.

 

[Hunter08]

Hi Guys,

Looking at Inside Bars and Pins as Trading Strategies. I can see the Strategy based around inside bars, makes sense. But then people talk about Fakeys. Fine, understand that as well, but how can you trade one without the other potentially hitting you. You cannot know the move is a fakey until it has completed?

The problem I once faced with the fakeys "false break inside bar" is to first determine the direction of the trend, or bias in the market, or identify the key levels of support and resistance. It becomes much easier when you simply pre empt, and decide which direciton your goign to trade first. I agree its a paradox, because you natrually think you will get caugh tin both trades, but it comesdown to which method you want to trade, you just need to make the choice to trad eeither the IB break outs , or the IB Fakey. There are plenty of realy great articles and videos on Price Action style setups here. Forex Training - Price Action/

Hope it helps.

 

[sniper012]

Actually, the inside bar can be a sign of a reversal or a continuation. If you are below the daily open, it is probably a good idea to trade short on any inside bars. However, I have often seen a pair reverse for big pips after an IB. In the attached chart, you can see that the IB(red arrow) forms above the daily open which should have been a bullish trade if you aren't flexible. I made 33 pips on the next candle which was bearish. You just have to be prepared to go either way. I made another 41 pips when I saw the pair starting to reverse and once it climed above the high of the IB, I went long on it.

Look in the Forex systems for a link to KISS system, this is a person trading IB's

Basically though what he says is when trading 1hr Tf he will take the london open eg 6am and if the price is below will only short from IB, if price above then only go long.

To adapt this to longer Tf try the weekly open, or previous 5 trading days or something, or just look for it continue with the general trend.

 

[tomorton]

I am looking at trading Inside Bars on the Dow, FTSE100, DAX etc. based on EOD prices, largely because of the very limited risk involved. I may start an ID thread if this works out.

With regards entries, I have read that many people set buy and sell orders regardless of underlying trend. So you could ignore MACD or any other trend confirmation signal and , allegedly, still make profit over a long runf of trades.

Of course, this raises the prospect of fake-outs. On these, I read that if your buy entry is triggered and price drops through the ID low, triggering your stop-loss, and staying low, it is low-risk to then double the size of the position and go short. Pattern could resemble a key reversal or whiplash candlestick if you use these.

Any thoughts from experienced users?

 

[elitejets]

I trade IB's (amongst others) and I did a lot of backtesting of them.
They do work counter the main trend to catch the trend of the day if you are disciplined about taking profit.
They performed worst on the indices, a lot get topped and tailed. I would not use them on the indices personally.
You can do some manual backtesting for yourself and see.

PS I know traders who double their size when they cut and reverse, It works for them but I wouldn't describe it as "low risk".

 

[oildaytrader]

I backtested a load of strategies on similiar stuff,unless trading with a trend or with major confirmed support, these types of strategies are useless.

Otherwise we are looking a price in a 50/50 edge , it does not want to go down or up.

Same with pins etc , price has gone down but pin does not push it lower.

Try these with trends , triple screen s/r and momentum and they should work for manual traders.

 

[tomorton]

Good food for thought, many thanks both.

 

[sniper012]

As I trade more IB's, I find that I'm getting better signals/results from using 4 hour bars. Obviously they don't form as often as they do on a shorter time frame, but the signal tends to be more solid. I have to assume that using them on a daily makes for even better signals but I have yet to try it out on a daily chart. Another thing you may want to keep in mind is: I have seen some systems or indicators that tell you to buy/sell on the break of the hi/lo of the actual inside bar. I beg to differ. I would suggest that you enter on the hi/lo break of the mother candle, that is, the candle in which the IB candle is within.

I am looking at trading Inside Bars on the Dow, FTSE100, DAX etc. based on EOD prices, largely because of the very limited risk involved. I may start an ID thread if this works out.

With regards entries, I have read that many people set buy and sell orders regardless of underlying trend. So you could ignore MACD or any other trend confirmation signal and , allegedly, still make profit over a long runf of trades.

Of course, this raises the prospect of fake-outs. On these, I read that if your buy entry is triggered and price drops through the ID low, triggering your stop-loss, and staying low, it is low-risk to then double the size of the position and go short. Pattern could resemble a key reversal or whiplash candlestick if you use these.

Any thoughts from experienced users?

 

[sniper012]

So what happens if the mother candle is broken 4 candles after the IB forms? Look at my chart below. The first red arrow is the mother candle, the inside bar is the next candle which I marked with a gold arrow. The low of the mother candle is not broken until 3 candles (or 12 hours) after it forms, indicated by the second red arrow. As you can see, a nice profit could have been made on this trade, but does this qualify as an IB trade?

 

[donovan5]

So what happens if the mother candle is broken 4 candles after the IB forms? Look at my chart below. The first red arrow is the mother candle, the inside bar is the next candle which I marked with a gold arrow. The low of the mother candle is not broken until 3 candles (or 12 hours) after it forms, indicated by the second red arrow. As you can see, a nice profit could have been made on this trade, but does this qualify as an IB trade?

Would you set a stop on the other side of the mother bar as well?

 

[elitejets]

So what happens if the mother candle is broken 4 candles after the IB forms? Look at my chart below. The first red arrow is the mother candle, the inside bar is the next candle which I marked with a gold arrow. The low of the mother candle is not broken until 3 candles (or 12 hours) after it forms, indicated by the second red arrow. As you can see, a nice profit could have been made on this trade, but does this qualify as an IB trade?

Trading IB's is trading price action. You are trading a breakout after a period of indecision or consolidation. So its not an indicator system where someone says enter here or exit there. You have to play with it and come up with your own rules that work for you.
I will take IB's up to 4hrs later depending on the circumstances. That USDJPY trade is a good example of one sitting on support so if it goes then the support has broken and that level is likely to become resistance and help your trade. I would put my stop above the IB and not the full mother bar, others may do it differently.
If you read the FF thread then they say take half of your profit off if the trade gets to 1:1 and then trail your stop. I have completely different rules for profit taking so more of my IB's fail than the FF thread but the winners pay for them

Once you decide what your rules are going to be its really quite a simple set up to trade.

 

[oildaytrader]

Trader mike describes how he use contraction bars.

http://tradermike.net/2006/10/narrow_range_bars_range_contraction/

Best used in trends and trading with the trends.They can be used counter trends , if gambling against trend power of the market ,not good for the mind or your account.

 

[oildaytrader]

It does not matter what time frame you use inside bars, as long as there is a nice trend.

Just look at the hsbc chart today , uptrend and inside bar ,hourliy charts , buy on breakout of the 8 am to 9 am range.