Hello,
Welcome to the Inside Bar Trading Technique (IB).
I like this technique because it allows me to be ready for any direction that the market moves which is a good thing as I am completely unable to predict with any cetainty where the market os going to move to next.
With certainty, I am able to tell you that using this tehnique will allow you to quit caring which direction the market moves so that you can feel at ease while trading.
Please note that I am not an expert at this technique and am still trying to get my MM strategy down, so any input that anyone would like to share would be greatly appreciated.
Here is what you will need for tools:
Indicators
1. SHI_SilverTrendingSignal - Attached below
This indicator is used to determine the trend. Early on we used to place trades above and below an inside bar. With the help of this indicator we will only place trades in direction of the trend. When the dot closes above a bar, we only place short trade orders and when a dot closes below a bar we only place long orders. All settings for this indicator are defualt except you may want to change the colors of the dots as to me they are backwards. Because this indicator can be wrong and will repaint itself, you should get confirmation of the trend using the Awesome Oscillator as described below.
2. Awesome Oscillator (AO) by Bill Williams: You should use this indicator as a confirmation of the trend. Before considering any short trades, make sure that #1 has occured and that the AO has also closed as a red bar. Before considering any long trades, make sure that #1 has occured and that the AO has also closed as a green bar. During a long trending trade, the AO will likely switch colors any number of times, but this will mean nothing unless it is accompanied by #1 above.
When both 1 & 2 above have occured, then you will only place inside bar trades in the direction of the trend.
3. I love Bill Williams 'Alligator' up on the chart and I am starting to see how price can react in relation to this indicator. I think that this indicator is a great one to have on your screen at all times and really has no bearing with this current technique.
Charts
Daily
Take Profit Targets
This section has changed since deciding to add only trading in the trend direction. As I am trying to find the best T/P stratedy, it may be edited some more as well.
Place your order with the trend as above.
Basically you should be planning to keep this position open until you get a reversal signal. For now, I think that reversal signal should be the formation of a Silver Trend dot appearing on the close of a bar to signal a possible revesal is about to happen. Then you would set your exit postion at the High or Low of this bar (depending on the direction of your current trade). this will give your trade a chance to stay with the trend if it will.
One thing to remember is that just because your trades closed, you will not consider placng a trade in the opposite direction until both 1 & 2 above have been satisfied. On the flip side, even though your trades closed out, and until you get a complete reversal signal, you should still consider placing any new trades in the direction of the current trend incase of reversal.
The excetion to this rule is that if you have a trade with little profit or a small loss, you may want to close this particular trade out at the formation of the dot and not wait for it to hit the high or low which could close you out for a higher loss. Any trades that will still be clearly in profit if your new exit target is hit should be left to hit that exit target.
What is an inside bar?
An inside bar is a bar when at it's close has a high that is < yesterday's high and a low that is > yesterday's low.
The concept here is that the market has to go somewhere after the formation of a inside bar. It is either going to go higher, lower or bounce around for a bit longer. Are goal is to take minimal losses or break even while we remain in position to catch the trend when it finally happens.
Pairs
This will work with all pairs, just be sure to risk less with a pair that has more movement and will offer you a larger initial S/L
Goals
To capture the long runs on the daily charts
Entry
Wait for the next inside bar to form and place either a buy stop 1 pip + spread above the high of that bar or a sell stop 1 pip below the low of that bar. You will only place these orders in the direction of the determined trend as described above using the SHI_SilverTrendIndicator and the AO.
Leave these orders ready open until a a new inside bar is formed and then change your orders to accomadate for this new inside bar or as long as the new inside bar also is pointing in the same direction, you could consider leaving both trades as pending orders since you will now be trading them with the trend. If the trend changes and your bar did not trigger, close all pending orders.
Hard Stop
There are a few strategies to work with here.
1. Use a hard stop of 100 pips
2. Use the ATR to determine your initial stop only or 2x ATR
3. Place your stop at the opposite side of the inside bar.
And remember that if you are stopped out you should replace your order on the next day if your position and trend direction will allow you to do so.
Multiple Inside Bars
You should consider using all inside bars that form as long as you only set pending orders in the direction of the trend.
Money Management
I no longer look at the Forex Market as "Get Rich Quick". I prefer to start small, build it up and get comfortable knowing that I can take a profit when the money starts to compound. Also, because I end up placing multiple orders in the same direction using my complete system I need to keep my lot sizes small.
I suggest using .25 mini lots for any 10K in equity. Then add .01 lots for every $400 in increased equity. This may not seem like a lot, and if you are just trading the IBT then it might not be, but with all the trades I enter, .25 mini lots can = 5 to 8 lots by the time it is all said and done.
What if I am stopped out?
If you are stopped out, reset your orders based on the most current inside bar which could be the one you just stopped out from. If a new inside bar has formed, use these new settings for entry, take proft and exiting and delete all orders from the previous bar. It is also safe to say that you may only be able to set one side of the IB at a time if you are above or below the actual bar itself. This is okay. Just make sure to remember to set the other side of the bar when the first side is hit so you are ready for a reversal.
Sunday's Data
If you are using software that charts a bar for Sunday night, add this to Monday's bar and compare this combination to Friday's close. If Sunday opens outside the relm of a formed you can place a market order if it is not too far away from where you would have entered any way.
I will add to this any changes as long as I can.
Best too all in 2008!
Damon
Books to read by Bill Williams:
Trading Chaos
New Trading Dimensions
Welcome to the Inside Bar Trading Technique (IB).
I like this technique because it allows me to be ready for any direction that the market moves which is a good thing as I am completely unable to predict with any cetainty where the market os going to move to next.
With certainty, I am able to tell you that using this tehnique will allow you to quit caring which direction the market moves so that you can feel at ease while trading.
Please note that I am not an expert at this technique and am still trying to get my MM strategy down, so any input that anyone would like to share would be greatly appreciated.
Here is what you will need for tools:
Indicators
1. SHI_SilverTrendingSignal - Attached below
This indicator is used to determine the trend. Early on we used to place trades above and below an inside bar. With the help of this indicator we will only place trades in direction of the trend. When the dot closes above a bar, we only place short trade orders and when a dot closes below a bar we only place long orders. All settings for this indicator are defualt except you may want to change the colors of the dots as to me they are backwards. Because this indicator can be wrong and will repaint itself, you should get confirmation of the trend using the Awesome Oscillator as described below.
2. Awesome Oscillator (AO) by Bill Williams: You should use this indicator as a confirmation of the trend. Before considering any short trades, make sure that #1 has occured and that the AO has also closed as a red bar. Before considering any long trades, make sure that #1 has occured and that the AO has also closed as a green bar. During a long trending trade, the AO will likely switch colors any number of times, but this will mean nothing unless it is accompanied by #1 above.
When both 1 & 2 above have occured, then you will only place inside bar trades in the direction of the trend.
3. I love Bill Williams 'Alligator' up on the chart and I am starting to see how price can react in relation to this indicator. I think that this indicator is a great one to have on your screen at all times and really has no bearing with this current technique.
Charts
Daily
Take Profit Targets
This section has changed since deciding to add only trading in the trend direction. As I am trying to find the best T/P stratedy, it may be edited some more as well.
Place your order with the trend as above.
Basically you should be planning to keep this position open until you get a reversal signal. For now, I think that reversal signal should be the formation of a Silver Trend dot appearing on the close of a bar to signal a possible revesal is about to happen. Then you would set your exit postion at the High or Low of this bar (depending on the direction of your current trade). this will give your trade a chance to stay with the trend if it will.
One thing to remember is that just because your trades closed, you will not consider placng a trade in the opposite direction until both 1 & 2 above have been satisfied. On the flip side, even though your trades closed out, and until you get a complete reversal signal, you should still consider placing any new trades in the direction of the current trend incase of reversal.
The excetion to this rule is that if you have a trade with little profit or a small loss, you may want to close this particular trade out at the formation of the dot and not wait for it to hit the high or low which could close you out for a higher loss. Any trades that will still be clearly in profit if your new exit target is hit should be left to hit that exit target.
What is an inside bar?
An inside bar is a bar when at it's close has a high that is < yesterday's high and a low that is > yesterday's low.
The concept here is that the market has to go somewhere after the formation of a inside bar. It is either going to go higher, lower or bounce around for a bit longer. Are goal is to take minimal losses or break even while we remain in position to catch the trend when it finally happens.
Pairs
This will work with all pairs, just be sure to risk less with a pair that has more movement and will offer you a larger initial S/L
Goals
To capture the long runs on the daily charts
Entry
Wait for the next inside bar to form and place either a buy stop 1 pip + spread above the high of that bar or a sell stop 1 pip below the low of that bar. You will only place these orders in the direction of the determined trend as described above using the SHI_SilverTrendIndicator and the AO.
Leave these orders ready open until a a new inside bar is formed and then change your orders to accomadate for this new inside bar or as long as the new inside bar also is pointing in the same direction, you could consider leaving both trades as pending orders since you will now be trading them with the trend. If the trend changes and your bar did not trigger, close all pending orders.
Hard Stop
There are a few strategies to work with here.
1. Use a hard stop of 100 pips
2. Use the ATR to determine your initial stop only or 2x ATR
3. Place your stop at the opposite side of the inside bar.
And remember that if you are stopped out you should replace your order on the next day if your position and trend direction will allow you to do so.
Multiple Inside Bars
You should consider using all inside bars that form as long as you only set pending orders in the direction of the trend.
Money Management
I no longer look at the Forex Market as "Get Rich Quick". I prefer to start small, build it up and get comfortable knowing that I can take a profit when the money starts to compound. Also, because I end up placing multiple orders in the same direction using my complete system I need to keep my lot sizes small.
I suggest using .25 mini lots for any 10K in equity. Then add .01 lots for every $400 in increased equity. This may not seem like a lot, and if you are just trading the IBT then it might not be, but with all the trades I enter, .25 mini lots can = 5 to 8 lots by the time it is all said and done.
What if I am stopped out?
If you are stopped out, reset your orders based on the most current inside bar which could be the one you just stopped out from. If a new inside bar has formed, use these new settings for entry, take proft and exiting and delete all orders from the previous bar. It is also safe to say that you may only be able to set one side of the IB at a time if you are above or below the actual bar itself. This is okay. Just make sure to remember to set the other side of the bar when the first side is hit so you are ready for a reversal.
Sunday's Data
If you are using software that charts a bar for Sunday night, add this to Monday's bar and compare this combination to Friday's close. If Sunday opens outside the relm of a formed you can place a market order if it is not too far away from where you would have entered any way.
I will add to this any changes as long as I can.
Best too all in 2008!
Damon
Attached File(s)
SHI_SilverTrendSig.mq4
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4,592 downloads
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Uploaded Feb 17, 2008 9:41am
Books to read by Bill Williams:
Trading Chaos
New Trading Dimensions
"Keep your eyes on the helpers" - Mr. Rogers