Small inside bar study...
Just to share a small amount of research I did this morning. Thought it was interesting. I was curious as to the nature of inside bars, and whether they had any predictive power. While I couldn't find any directional predictability on daily single bar IBs, I did find that there was a strong volatility pattern.
EURUSD, daily bars going back to 2003. The average high to low range was 117 pips. The average inside bar range was 82.7 pips, the average day after the inside bar was 124 pips.
That's right, the day after an inside bar tends to not only have a much higher top to bottom volatility than the IB, but also higher than the average.
GBPUSD, back to 2003. Average high to low range was 157 pips. Average IB range was 112 pips. Average after IB range was 161 pips. Same deal, the day after is slightly higher than average, and far higher than the day before.
Where am I going with this? Well if you were going to trade intra-day you'd at least want a day where the price was likely to move the most. Perhaps it makes sense then to confine your trades to days when movement is most likely.
Now this is hardly new research. Toby Crabel did research on this, as have at least a hundred other traders. This is hardly new to me, either, as it's one of the patterns I've come to look for. But it's nice to know. And I thought maybe others could use it too.
Just to share a small amount of research I did this morning. Thought it was interesting. I was curious as to the nature of inside bars, and whether they had any predictive power. While I couldn't find any directional predictability on daily single bar IBs, I did find that there was a strong volatility pattern.
EURUSD, daily bars going back to 2003. The average high to low range was 117 pips. The average inside bar range was 82.7 pips, the average day after the inside bar was 124 pips.
That's right, the day after an inside bar tends to not only have a much higher top to bottom volatility than the IB, but also higher than the average.
GBPUSD, back to 2003. Average high to low range was 157 pips. Average IB range was 112 pips. Average after IB range was 161 pips. Same deal, the day after is slightly higher than average, and far higher than the day before.
Where am I going with this? Well if you were going to trade intra-day you'd at least want a day where the price was likely to move the most. Perhaps it makes sense then to confine your trades to days when movement is most likely.
Now this is hardly new research. Toby Crabel did research on this, as have at least a hundred other traders. This is hardly new to me, either, as it's one of the patterns I've come to look for. But it's nice to know. And I thought maybe others could use it too.
