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Since I've been reading Al Brooks, I've been playing with a lot of new techniques. One of which is Inside and Outside bars, which I didn't use to pay much attention too -- mainly because I didn't pay much attention to minute charts.
Here is a daily chart with some examples of inside and outside bars. I colored inside bars purple, and outside bars light cyan. I used 420m because I used a 7-hour cash session schedule for the bars.
Overall, it doesn't work very well by itself as a strategy to enter a position on the breakout. I found it worked better on daily charts than on anything else.
However, when you drill down to a 5m chart, if you look for traps then it can be a great entry signal. So let's say you get a breakout from an inside bar to the high side, but price is already very bullish compared to the EMA 20 or very bullish compared to yesterday's high or resistance level, you could then place an entry on the other end of the bar and wait for a low close to enter in the opposite direction of the breakout, entering where trapped traders are forced out.
Attached are some examples of 5m charts, both working and not so much...
Kind of like a turtle soup entry?
I am sure there were other nuances to the setup but essentially it boiled down to a bull/bear trap and a failed breakout.
Very keen to get hold of Al Brooks book but we have postal strikes here in the Uk so goodness knows when I will get it!
Thanks for starting this thread. It got me going back in the book and reviewing some material on inside and outside bars as it was something that had gotten lost in the quagmire of Brooks info filling up my brain. Is that an indi that is coloring the inside/outside bars? Could you post it? I snagged the InsideBar indi off Ninja forums but its weird, only paints some bars.
Mike,
great post !
I'm working now on additional research of inside/outside bars.
I have question to you : on the attached charts...inside/outside bars are colored...have you used any specific "indicator" doing that ? where that could be downloaded by non VIP members?
Thank you.
Krgds,
Andrew
