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THREE SET UPS


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THREE SET UPS

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  #571 (permalink)
 Fat Tails 
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THe chart below shows three inside bars.

(1) The range of this inside bar was too large. It was not a NR 4 bar, so I did not take it.

(2) The preferred breakout was to the upside, this would have been a second entry sitting on the lower band of the Keltner Channel. The breakout from the inside bar occured to the downside, so I did not take it. The bar after this inside bar is a reversal and a churn bar. So I entered long 1 tick above the churn bar, which is midrange of the inside bar.

(3) The third inside bar shows balancing action after a strong candle up. Note that the body of this inside bar is above the body of the candle up. This means that the new price has been confirmed. As I already was long from the entry above the churn bar, I only used this inside bar to adjust the stop loss just two ticks below this bar.

Target 1 was at main pivot PP.

Target 2 was at yesterday's close. Target 2 was not met. When the climax churn bar (magenta volume) had been formed, it was necessary to exit the trade 2 ticks below the main pivot PP.

I am still bullish now, because the 15 min chart shows a potential Gartley pattern.

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  #572 (permalink)
 Fat Tails 
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And the price action continued....

There were two consecutive bullish Gartley patterns on the 15 min chart. The first one had already produced a bullish breakout during the night session.

During the consolidation pattern in the morning, a double inside bar developped, sitting on the trendline. The breakout occured to the upside, as expected. This was a fast and easy trade. I am still holding the second half of my position.

Interesting observation

I remember that a similar case has already been observed by somebody else on this thread.

The inside bar on the hourly chart developped as well, but it broke out to the upside by a few ticks 2 minutes prior to its completion, so it never materiliazed. This is very bullish.

This is how the best trades occur

A breakout from a 5 min chart triggers a breakout on the 15 min chart. Then the breakout from the 15 min chart triggers a breakout on the 60 min chart. In the end this can lead to a large move over several days. If I only I had the patience to let the profits run....

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  #573 (permalink)
 Fat Tails 
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I took my profits too early, when price hit the upper border of the range.

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  #574 (permalink)
 cunparis 
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Fat Tails View Post
I took my profits too early, when price hit the upper border of the range.

Can you turn on your chart markers so we can see how you're trading these?

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  #575 (permalink)
 Fat Tails 
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Sorry, never have them on, don't like them, as they cluster my chart. Next time I will put them on for the screenshots.


cunparis View Post
Can you turn on your chart markers so we can see how you're trading these?


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  #576 (permalink)
 Jeff Castille 
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cunparis View Post
I forgot the rule about not trading before crude inventory report.

-5 for me. Will not forget next time.


Cunparis.......this trade moved +15 ticks in your favor......how is it possible that you ended up with -5?

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  #577 (permalink)
 cunparis 
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Jeff Castille View Post
Cunparis.......this trade moved +15 ticks in your favor......how is it possible that you ended up with -5?

My target is 19 ticks.

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  #578 (permalink)
 Fat Tails 
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I believe there is no edge in just trading insíde bars.

If this was possible, we all would become rich, quickly. Many guys who are a lot smarter than we are, would have discovered this long ago, and according to the efficient market hypothesis, any edge would have disappeared as a consequence of their trading.

However, I like inside bars, because they provide for low risk entries, at least if they are narrow range bars. So here comes my first modification, I only take inside bars that are NR4 bars as well. I admit that I stole this idea from Toby Crabel. I also trade all NR7 bars in the same way as inside bars.

Next I need a set of filters, to keep me away from false breakouts. I remember that I had tried to trade squeezes, as described in the book by John F. Carter, some time ago. After the breakout from the consolidation I was trapped as often as I was successful, so the concept as such did not work for me.

So these are my filters for trading inside bars

- at least NR 4
- higher timeframe analysis (trend and pattern) to establish breakout preference
- bar and range analysis (locaction of the bar compared to prior bar and last expansion bar)
- volume analysis (climax and churn volume)
- establishing support and resistance (prior lows and highs, floor pivots, fib lines, trend and trend channel lines)
- reward-to-risk-ratio

I do not think it is wise to a set a fixed profit target of x ticks without looking at the chart. I am also not using a money management stop, but select a stop loss, which invalidates the trade idea, when hit. Of course, the actual stop needs to be smaller than the calculated money management stop.

The reward-to-risk ratio should be at least 1:1 for my first target. To establish the first target, I need to look at support (short setup) or resistance (long setup). My stop-loss is x ticks above or below the inside bar. My total risk therefore amounts to the range of the inside bar + 2 (x + slippage). This needs to be smaller than the distance from my sell stop (short) or buy stop (long) to the profit target.

Or to put in simple words: I want that the profit side of my bracket order is larger than the loss side, otherwise I won't take the trade.

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  #579 (permalink)
 cunparis 
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Fat Tails View Post
I believe there is no edge in just trading insíde bars.

If this was possible, we all would become rich, quickly. Many guys who are a lot smarter than we are, would have discovered this long ago, and according to the efficient market hypothesis, any edge would have disappeared as a consequence of their trading.

You're free to believe whatever you like, but I find it a very self-limiting belief.

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  #580 (permalink)
 Fat Tails 
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Just tried to add some value to the setup introducing filters, targets and a reward-to-risk ratio.


cunparis View Post
You're free to believe whatever you like, but I find it a very self-limiting belief.


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