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Inside Bar Trading Technique

  • #101
  • Feb 12, 2008 2:46pm Feb 12, 2008 2:46pm
Quoting Farad

1) Arrow 1 shows the first IB. You use that to set up the long and short positions. However, the candle after this one is also an IB. Do you ignore that? Is there a limit on the body of the candle for that to be a valid IB?
Correct me if I'm wrong, but that looks like a Sunday bar. If you count 5 bars before/after after this one, you get more Sunday looking bars.
  • #102
  • Feb 12, 2008 10:00pm Feb 12, 2008 10:00pm
Quoting brisvegus
Hi Damonl, in regards to sunday candles. are they part of the picture to, as some move 20 or 30 pips and almost assures an inside bar from the previous day. i have used them this week so far and done really well from them but i thought i better check with you. really the ones that dont move really at all should be skipped and use earlier days. gj gu ej moves a little. thanks for you great work. im on every day buddy so dont feel your alone. its a great thread. steve
What I usually do is add Sunday's bar to Monday's bar and then treat them as one bar, and compare this now one bar to Friday's or Tuesday's.

It is okay to do it like you are except that the S/L would be so close together that you would need to be around to reset your orders multiple times.
"Keep your eyes on the helpers" - Mr. Rogers
  • #103
  • Edited 10:20pm Feb 12, 2008 10:04pm | Edited 10:20pm
Quoting gnllr
Thank you Damon for your systems, ideas, and trading spreadsheets.

Could you elaborate on how you add additional trades following an Inside Bar breakout?

Glen
My pleausre, I wish I had more time to give you everything all at once, but I would have no time left.

As time permits, I will go over with you my other methods as well as give you the updated version of my new spreadsheet. I am hoping to make a new post soon enough with an explanation of how I add to my positions.

Hang in there, I will get to it as soon as I can....my darn day job still is getting in my way, but I think it's days are numbered.

In the meantime I recommend everyone go to Amazon.com and order those two books I have listed on the 1st page. If you are serious about learning how to trade, these are well worth you while.

Cheers,

Damon

P.S. One way that I am testing is the Pivot Point Trading Technique which you can also find on this forum. So far I am at 50% win ratio, but the market is very tight right now, and I am in the early stages of testing, but I think it will prove a winner.
"Keep your eyes on the helpers" - Mr. Rogers
  • #104
  • Feb 12, 2008 10:09pm Feb 12, 2008 10:09pm
Quoting NowAndLater
This is the kinda threads that I like to see on FF, the non-indicator threads! I am very interested in this and will be using this strategy on a demo account.

And if your other strategies are like this one... well lets just say that I hope nothing comes down from my underwear when I see them . Cant wait for you to post them.

Just 2 questions:
1) As I've understand it, you will open to pending trades and you don't close the other once the first has triggered, which means that you will be along the ride to the other side?
2) Could you please tell us more about how you add to your position?

Keep up the great work! And I will try and post my demo trades, if that's ok.
Please feel free to post your results.

Yes, I do stay short, for when the trade goes the other way. This will automatically become a mulitple entry for you when and if the trade does turn around.

I will only keep up to 4 Inside Bar pending orders at any one time. If a 5th one is formed, I will decide which one to get rid of. Either the one farthest away one that is very close to another.

Please see my post above as to additional entry postions.

Cheers,

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #105
  • Feb 12, 2008 10:16pm Feb 12, 2008 10:16pm
[quote=Farad;1847632]
Quoting damonl
Okay, this will be pretty crude and you will have to count arrows, but I will walk you through a few trades on the chart below.

Here is a view of the EUR/USD.]

Hi Damonl : Your explanations with the arrows on the trades is very useful. Thank you for sharing that with us. However, I have two questions.

1) Arrow 1 shows the first IB. You use that to set up the long and short positions. However, the candle after this one is also an IB. Do you ignore that? Is there a limit on the body of the candle for that to be a valid IB?

2) Suppose you are about arrow 9 and still the first IB is valid. If you are stopped out, how do you choose your long or short entries? The point is that you are far from the original IB candle and entries based on that candle become improbable (or perhaps not as useful).

Thanks for the information.
After arrow 1 you have a Sunday candlestick. See above posts or the 1st page regarding Sunday candlesticks.

If you are far away from an inside bar and are stopped out, you will still be able to set one side of the Inside Bar as an order. If you are above it you can initally set a Sell Stop. This could become another entry point that you forgot about if the market switches directions.

Maybe my answers above will give you a little more insight as well.

Cheers,

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #106
  • Feb 12, 2008 10:18pm Feb 12, 2008 10:18pm
Quoting niner49
Correct me if I'm wrong, but that looks like a Sunday bar. If you count 5 bars before/after after this one, you get more Sunday looking bars.
You are correct.

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #107
  • Feb 12, 2008 10:27pm Feb 12, 2008 10:27pm
Hello....

UJ and UCHF have both given us our second Inside Bar set-up in the last 5 days.

I have added this new information as another pending order.

There will be a break, where and when I don't know, but now I will have at least two postions long and two positions short just with this strategy.

As the market is tight, be prepared for small losses while postioning for the break out which will give you thousands of pips in multiple postions. When you are postitioned for success, you will no longer count your small losses.

Remeber to keep you lot sizes small. I give an example on page 1.

Happy trading,

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #108
  • Feb 13, 2008 4:37pm Feb 13, 2008 4:37pm
Quoting damonl
Hello....

UJ and UCHF have both given us our second Inside Bar set-up in the last 5 days.

I have added this new information as another pending order.

There will be a break, where and when I don't know, but now I will have at least two postions long and two positions short just with this strategy.

As the market is tight, be prepared for small losses while postioning for the break out which will give you thousands of pips in multiple postions. When you are postitioned for success, you will no longer count your small losses.

Remeber to keep you lot sizes small. I give an example on page 1.

Happy trading,

Damon
Hey Damon, thanks for posting, it's helping me coalesce some ideas for a trading strategy.

One question, would you mind shedding some light on how you formed your TP strategy? I'm obviously not sure how much you've researched/backtested this, although at first glance it seems a little arbitrary. Have you considered a ATR based trailing stop?

Also, since these trades can break either way, what about employing a tighter TP strategy for trades against the trend? Just throwing some ideas out there, I'd love to hear your thoughts when you find a minute.
  • #109
  • Feb 14, 2008 5:18am Feb 14, 2008 5:18am
Quoting niner49
Hey Damon, thanks for posting, it's helping me coalesce some ideas for a trading strategy.

One question, would you mind shedding some light on how you formed your TP strategy? I'm obviously not sure how much you've researched/backtested this, although at first glance it seems a little arbitrary. Have you considered a ATR based trailing stop?

Also, since these trades can break either way, what about employing a tighter TP strategy for trades against the trend? Just throwing some ideas out there, I'd love to hear your thoughts when you find a minute.
Hey niner49.....

The first thing to keep in mind is that I am playing for the trend. If I make a little money in a ranging market that is just gravy. If I lose a little money in a ranging market I am okay with that. The big money is catching the trend and riding it till it reverses, even if that is 2 months later.

My first goal is to T/P. so after my first day in profit I go to B/E +10. This might seem impulsive, but you have to remeber that I already have maybe 5-8 orders that will still need to be triggered as it continues to move, even if I get stoped out with this order. The only time I want to take a out and out loss is if I never close in profit.

After that I am shooting for my 1st T/P and then moving my stops to B/E +50 on my remaining position. At +300 pips in profit (not close at +300 mind you) I will move to +100 profit. Then I wait using LL3/HH3 and hope that this move is the trend I have been waiting for.

Your ATR theory will work better in a ranging market as it will save you pips. My concept will lose more pips in a ranging market because it will retrace farther than a ATR method before closing out. However, the ATR method will do considerable less if the market trends by getting stopped out way to early. I am all about finding the trend only.

Is my T/P system the best, I don't know. Probably not, although I think it is a happy medium between getting out too early and getting out to late. The fact remains, I will continue to look at this, but until I see how things go in actual trading I will not be able to adjust it accordingly.

Also, I think that T/P and S/L issues are persnoal to each individual. How much I am willing to risk may not be the same as someone else. I like my current method and will probably stick with it for quite some time. I haven't put a lot of time into it, but many days at least going through different scenarios.

Also, if you know you are in a trending market, then you can adjust things accordingly, but if you are ranging, then you are never really trading against the trend, but rather with the range.

My goal is to learn to take any losses while ranging but try to at least B/E, and then make tens of thousands when it trends which it will do occassionaly and with many pairs to chosse from it will happen with many pairs at the same time.

Thanks for you input and let me know how the ATR systme works for you. I will definitely post any changes I make on the 1st page of this thread for as long as I am able.

Cheers,

Damon
"Keep your eyes on the helpers" - Mr. Rogers
  • #110
  • Edited 9:23am Feb 14, 2008 9:14am | Edited 9:23am
Thanks Damon for your thread,

I actually started looking at IB's a few days ago, after reading James' thread at BabyPips. He uses IB's in his system (as someone has already pointed out), and apparently finds them to be very accurate in predicting a move. In fact using his strategy the last few days, i havent made a losing trade. Im more of a 15 min chart type of guy though, however Im looking at 30min or hourly charts to trade (bigger pips lol).

Sounds like youve got a good grasp of it on the daily chart though, so good on you.

Kiwi06 (good to see another Kiwi round here, ok and you too Brisvegus, I know deep down you really want to be a kiwi..lol..) I am looking very seriously at the ButtNaked Trading strategy. Ive tested the last few days and again no losses yet (fingerscrossed). I used to be very heavily reliant on indicators MA crossovers etc blah blah blah and as such paid the price in whippy markets, but I now do feel that to really make it ahead in forex you have to kinda feel the market, and listen to what its telling you in the price action.

Anyways Im babbling on now, good on you Damon, and Ill be keeping an eye on events here..

Luck All..

NB: Forgot to add that James uses the Stochastic (settings 8,3,3) as an early indiactor as to which way the candle after the IB, is more likely to move.
  • #111
  • Feb 14, 2008 9:58pm Feb 14, 2008 9:58pm
Quoting totalpips
Thanks Damon for your thread,

I actually started looking at IB's a few days ago, after reading James' thread at BabyPips. He uses IB's in his system (as someone has already pointed out), and apparently finds them to be very accurate in predicting a move. In fact using his strategy the last few days, i havent made a losing trade. Im more of a 15 min chart type of guy though, however Im looking at 30min or hourly charts to trade (bigger pips lol).

Sounds like youve got a good grasp of it on the daily chart though, so good on you.

Kiwi06 (good to see another Kiwi round here, ok and you too Brisvegus, I know deep down you really want to be a kiwi..lol..) I am looking very seriously at the ButtNaked Trading strategy. Ive tested the last few days and again no losses yet (fingerscrossed). I used to be very heavily reliant on indicators MA crossovers etc blah blah blah and as such paid the price in whippy markets, but I now do feel that to really make it ahead in forex you have to kinda feel the market, and listen to what its telling you in the price action.

Anyways Im babbling on now, good on you Damon, and Ill be keeping an eye on events here..

Luck All..

NB: Forgot to add that James uses the Stochastic (settings 8,3,3) as an early indiactor as to which way the candle after the IB, is more likely to move.
Thanks for you post totalpips,

If you don't mind giving us an update on ButtNaked once in a while, I have it in the file folder, but have not had a chance to look yet. That would be great
"Keep your eyes on the helpers" - Mr. Rogers
  • #112
  • Feb 14, 2008 10:19pm Feb 14, 2008 10:19pm
Sorry if this seems like a dumb question, but what does LL3/HH3 mean?
  • #113
  • Feb 14, 2008 11:38pm Feb 14, 2008 11:38pm
Hi Damonl,

Thanks for the informative posts. I think this technique is great and frees traders from the constant anxiety of short TF trades. Of course the key to success in this method is patience.

Several times you have promised that you would let us know how you add to your trades. As you mentioned it is hard to get a descent number of pips by trading only one lot. I am looking forward to seeing the method you use to improve your final results. Thanks again
  • #114
  • Feb 15, 2008 12:35am Feb 15, 2008 12:35am
If your reading Kiwi06 this is your chance to step in and explain a bit about this system.

I find that your inside bar strat is great they are easy to spot and with a bit of patience you can almost always predict which way price will head next. Thats where the Stochastics comes in (overbought, oversold, turning point etc), also Fibs play an important part, and using pure price action alone with a bit of practice you can feel what the market is going to do, the indicators just confirm what you already know.

Using ButtNaked principles would help your success rate even more I feel. Of course I trade the 15min-1hr charts, and so Im not going to get the 500 pip runs, but I do get to trade the retraces during the quiet asian sessions, so in a way im doubling up on trades but potentially it may mean more pips.

Hour chart today on GBPJPY showed a good example of your inside bar, as well as a good example of buttnaked trading using double candle reversals. See chart attached. Red line through chart is where I got in (using ButtNaked) and then two candles later an Inside Bar to confirm a breakout was about to happen. Note the Stoch was showing the way ahead. Currently just over 70 pips up, with UK open on the way.
Attached Image (click to enlarge)
Click to Enlarge Name: gbpjpy 15 feb example.jpg Size: 120 KB
  • #115
  • Feb 15, 2008 5:58am Feb 15, 2008 5:58am
Quoting volan
Sorry if this seems like a dumb question, but what does LL3/HH3 mean?
For me, LL3 and HH3 mean this:

LL3 is the lowest low of the last 3 bars, not including the one that just closed. This would be used if you are in a long trade postion.

HH3 is the highest high of the last three bars, not including the one that just closed. This would be used if you are in a short position.

Hopefully this will clear things up for you.
"Keep your eyes on the helpers" - Mr. Rogers
  • #116
  • Feb 15, 2008 6:11am Feb 15, 2008 6:11am
Quoting totalpips
If your reading Kiwi06 this is your chance to step in and explain a bit about this system.

I find that your inside bar strat is great they are easy to spot and with a bit of patience you can almost always predict which way price will head next. Thats where the Stochastics comes in (overbought, oversold, turning point etc), also Fibs play an important part, and using pure price action alone with a bit of practice you can feel what the market is going to do, the indicators just confirm what you already know.

Using ButtNaked principles would help your success rate even more I feel. Of course I trade the 15min-1hr charts, and so Im not going to get the 500 pip runs, but I do get to trade the retraces during the quiet asian sessions, so in a way im doubling up on trades but potentially it may mean more pips.

Hour chart today on GBPJPY showed a good example of your inside bar, as well as a good example of buttnaked trading using double candle reversals. See chart attached. Red line through chart is where I got in (using ButtNaked) and then two candles later an Inside Bar to confirm a breakout was about to happen. Note the Stoch was showing the way ahead. Currently just over 70 pips up, with UK open on the way.
Thanks totalpips,

I appreciate your time. One thing for sure is that by trading the lower TF, you can actually bag a lot more pips in a run of winning trades then using the daily TF.

Keep in touch
"Keep your eyes on the helpers" - Mr. Rogers
  • #117
  • Feb 15, 2008 6:47am Feb 15, 2008 6:47am
Gidday Totalpips

I'm glad you like being naked lol.
Most of the system was formed from basically staring at blank bar charts and noting down what happened after each of the bar patterns, then I read TA Explained from Pring 4th Edition (thanks Santa) and finally googled pretty much everything on Bar Pattens. There is a lot of crap out there.
I have several versions of the EA the version posted is the trimmed down version, I have a couple of others where you can input the minimum bar size to look for etc.
The Basic premise was that these patterns happen on all TF's and it does not matter what you are trading be it FX, Futures or stocks that same thing should happen.
For the coders and naked people out there if you have a good patten that works for you please feel free to add it to the EA and post it.
I have attached the initial design and a free gift enjoy

Damonl is the LL3 and the HH3 where you place your stops? if so it's a bit like the Three bar trailing stop it works the same but when counting back you don't count the inside bars.

Unfortunately i can't code very well at all so please don't ask.

I hope this explains a bit more about the system.
Attached File(s)
File Type: doc ButtNakedBarTrading.doc   162 KB | 1,866 downloads
File Type: mq4 3barpullback.mq4   7 KB | 1,152 downloads
  • #118
  • Feb 15, 2008 7:19am Feb 15, 2008 7:19am
Yeah after I used every indicator out there, and finding that they all lag just far too much (especially for the big movers ie GBPJPY), I forced myself to sit and stare and try to get a feel for the markets. Your system Kiwi and Damon's use the patterns that the markets make as they fluctuate round.

Im still learning, especially my money management side of things. All to often Ill be 200 pips up thinking "Sweet here comes a 500", only to be stopped out for 30 pips, kicking myself at the same time. Ive found, (now I dont know how many people like it) that on the GBPJPY you can easily pick up 100 pips per night/day, just by finding the elusive inside bar, and either waiting for the move, or reading the Stochs.

As for the chart I posted earlier, yep the trade went against me, I got stopped out for +60 (after being almost 100 up), and then a reversal pattern was signaled, both with an inside bar, on the 15 min chart and a Key reversal candle (well close enough) using ButtNaked on the hourly. That was enough to put a sell order in, and low and behold went for 140+ pips, took that and now pretty much done for the night. So all up approx 200 for the night using no more then an inside bar, and a Key reversal candle.

For those of you out there using charts loaded with all sorts of indicators, stop, pull up an empty chart, make it a nice colour, get rid of the grid lines and watch (as Kiwi has done), within a very short time you will see the patterns forming. Watch the open and closes of candles, they tell a story.

Take a look at Kiwi's system and follow this (Damons) thread for help, info and collaboration. It is hard to let go of the indicators, and Im constantly adding one or two to see if they would have given a heads up as to a trade, but all to often they are to far behind to catch good moves.

Happy Trading...
  • #119
  • Feb 15, 2008 7:39am Feb 15, 2008 7:39am
And in addition to my last post the GBPJPY has now dropped over 230 pips from my sell position, damn it Im sure it always waits till Im out of the trade before continuing on...lol
  • #120
  • Feb 15, 2008 8:04am Feb 15, 2008 8:04am
Quoting damonl
For me, LL3 and HH3 mean this:

LL3 is the lowest low of the last 3 bars, not including the one that just closed. This would be used if you are in a long trade postion.

HH3 is the highest high of the last three bars, not including the one that just closed. This would be used if you are in a short position.

Hopefully this will clear things up for you.
Thank you for clearing that up for me.
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