Tag Archives: strategy

Asian Trading Strategy

18 Aug

 

Trading Strategy: Inside Bar

22 Dec

Inside Bar Forex Trading Entry

Inside bars are one of my favorite price action setups to trade with; they are a high-probability trading strategy that usually provides traders with a good risk reward ratio since they typically require smaller stop losses than other setups. I like to trade inside bars on the daily chart time frame in strong trending markets, as I have found over the years that inside bars are best in trending markets as breakout plays in the direction of the trend. Let’s discuss some facts about inside bar trading and go over some examples of how to trade them.

What is an inside bar?

An inside bar is a bar or series of bars which is/are completely contained within the range of the preceding bar, i.e., it has a higher low and lower high than the bar immediately before it (some traders use a more lenient definition of inside bars to include equal bars). On a smaller time frame a daily chart inside bar will look like a triangle.

Note in the daily chart example below we have two “coiling” inside bars (smaller and smaller inside bars) that are within the range of the preceding bar which we call the “mother bar”. The example below shows inside bars that led to a breakout play in an up-trending market.

What does an inside bar mean?

The inside bar forex trading strategyis a ‘flashing light’, a major signal to the trader that reversal or continuation is about to occur.

An inside bar indicates a time of indecision or consolidation. Inside bars typically occur as a market consolidates after making a large directional move, they can also occur at turning points in a market and at key decision points like major support/resistance levels.

They often provide a low-risk place to enter a trade or a logical exit point. Note in the image below we see an example of an inside bar that formed as a continuation signal and then one that formed as a turning point signal. While they can be used in both scenarios, inside bars as continuation signals are more reliable and easier for beginning traders to learn. Turning-point inside bar signals are better left for more advanced forex price action traders.

inside-bar-images

The best time use the inside bar signal

The most logical time to use an inside bar is when a strong trend is in progress or the market has clearly been moving in one direction and then decides to pause for a short time. If we play the break out, our stop loss can be defined by placing it below the half way point of the mother candle, or for the more conservative trader, below the mother bar itself. This would mean that the market must break a 3 bar low to take us out of the trade.

Inside bars can be used when trading a trend on the 240 minute charts or the daily Forex charts, but I personally prefer to trade inside bars on the daily charts and I recommend all beginning traders should stick to the daily charts until they have fully mastered and found consistent success with the inside bar setup on that time frame.

Note on the daily AUDUSD chart below, we can see two inside bar setups that occurred with the recent near-term market momentum. As they broke out they both led to large directional moves and provided for an excellent risk reward ratio.

What Time of day Suits you Best in Forex Trading?

6 Dec

Generally speaking, the most active forex trading hours all around are between the London markets opening around 8:00 GMT and end with the markets in the US closing around 22:00 GMT. The absolute busiest time in the forex markets are during the London to US overlap between 13:00 GMT to 16:00 GMT. These are the hours that are the most liquid or when the most traders are in the markets making trades. If your intention is to do daytrading, these are key hours!

What are the major sessions for forex trading?

 

There are 3 major sessions each day in the forex markets. They are the London session, the US session and the Asian session.

The London Session
The London session starts around 8:00 GMT and winds down around 16:00 GMT. The currencies that are the most active during these hours are EUR, GBP, and USD.

The US Session
The US session starts around 13:00 GMT and winds down around 22:00 GMT. The currencies that are the most active during these hours are AUD, EUR, GBP, JPY and USD.

The Asian Session
The Asian session is a reasonable quiet session on most days. All pairs are pretty slow moving and it is not a good time to day trade. The only real currency that has noteworthy activity is the JPY and the activity is slow unless a major financial event happens. Trading the World

 

Summary

The best hours for trading the forex market, no matter your method, are during the London and US session overlap. The markets are full of active participants during these hours and the currencies really move. For the most part, even the larger fundamental news comes out during these times. Trading during these hours is your best chance to get in while the market is making decisive moves and it will be your best chance to score quick profits.

Range trading with RSI on a 15 Minute Chart

6 Dec

Entry Rule: When the 14-period RSI crosses above 30, buy at market on the open of the next bar. When RSI crosses below 70, sell at market on the open of the next bar.

Filter: Strategy cannot enter trades between the “end hour” and the next “start hour”.

Exit Rule: Strategy will exit a trade and flip direction when the opposite signal is triggered. For a more precise analysis you should combine this strategy with candlestik patterns.

25 Disciplinary Rules in Day Trading.(III)

29 Nov

11. The first loss is the best loss. Once you come to the realization that your trade is no good It’s best to exist immediately. “It’s never a loser until you get out” and “Not to worry, it’ll come back” are often said tongue in cheek, by traders in the pit. Once the frase is stated, it is an affirmation that the trader realizes that the trade is no good, it is not coming back and it is time to exit.

12. Don’t hope and pray. If you do, you will lose. When i was a new and undisciplined trader, I can’t tell you how many times that I prayed to the “Bond god”. My prayers where a plea to help me out of  a less than pleasant trade position. I would pray for some sort of divine intervention that, by the way, never materialized. I soon realized that praying to the  “Bond god” or any other “futures god” was a wasted exercise. Just get out!

13. Don’t worry about news. It’s history. I have never understood why so many electronic traders listen to or watch CNBC, MSNBC, Bloomberg News or FNN all day long. The “talking heads” on these programms know very little about market dynamics and market price action. Very few, if any, have ever even traded one lot in any pit on any exchange. Yet they claim to be experts on everything. Before becoming a “trading and markets expert,” the guy on CNBC reporting hourly the Bond Pit, was a phone clerk on the trading floor. Obviously this qualifies him to be an expert! He, and others can provide no utility to you. Treat it for what it really is… entertainment. The fact is: The reporting that you hear on the business programs is “old news.” The story has already been dissected and consumed by the professional market participants long before the “news” has benn diseminated. Do not trade off of the reporting. It’s too late.

14. Don’t speculate. If you do, you will lose. In all of the years that I have been a trader and associated with traders, I have never met a successful speculator. It is impossible to speculate and consistently print large winners. Dont’t be a speculator. Be a trader. Short-term scalping of the markets is the answer. The probability of a winning day or week is greatly increased iy you trade short term: small winners and even smaller losses. (I like this one)

15. Love to lose money. This rule is the one that i get the most questions and feed -back on by traders from all over the world. Traders ask, “What do you mean, love to lose money. Are you crazy?” No, I’m not crazy. What I mean is to accept the fact that you are going to have losing trades throughout the trading session. Get out of your losers quickly. Love to get out of your losers quickly. It will save you a lot of trading capital and will make you a much better trader.

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