Inside Bar Trading Journal (100 Inside Bar Live Trades)

Last Updated: Jan 14, 2020 @ 11:12 pm

Hi fellow traders, how are you doing right now? Welcome to my inside bar trading journal!

Before you read this journal, I encourage you to check out our forex no deposit bonus 2024 listing.

You can pick any welcome bonus that you like and apply the inside bar strategy you are about to read.

I am curious, is your trading profitable? If not, you might want to continue to read this article.

I am Engedi, the owner of Forex Penguin. I became a forex trader in 2005. Since then I have encountered plenty of good and bad experiences in forex trading.

Altogether I have used many different trading systems. All of them seemed promising but ended up with me losing a lot of money.

I have stopped trading for a while now. Maybe forex trading is not my thing.

Yet, curiosity got me thinking. If there are so many successful traders out there, surely there is a way for profitable trading.

The mission of this article is to find out that way.

The Purpose Of This Inside Bar Trading Journal

I have searched online massively but cannot find any useful information about how profitable the inside bar trading is.

All I found was how to trade with the inside bar method. All of them are nothing but theoretical lessons!

This ignites my interest to begin forward testing with it. I believe the results can at least help us to know whether the trading strategy works.

I hope that this report will be the last report that you will need to read online about inside bar trading; or even better – the only report you will ever need to gain profitable trading.

This whole system has a name: Penguin Inside Day System (PIDS).

PIDS Parameters (Best For Inside Bar Trading)

In this experiment, the following parameters will be used:

• # of trades: 100
• Currency pairs: EUR/USD, USD/JPY, AUD/USD, GBP/USD, NZD/USD, GBP/JPY, EUR/JPY.
• Risk Reward Ratio: 1:2
• Initial Capital: $7000 (cent account)
• Broker: Instaforex
• Leverage: 1:1000
• Risk Per Trade: $140 (2% of Total Balance)

For every trade setup listed below, I am using the following status:

• Pending Order = Inside bar is spotted and pending orders are set.
• Canceled = Pending order is canceled for various reasons.
• Ongoing = Trade is active.
• Closed = Trade is complete, either in profit or loss.

PIDS Trade Setup List

As the name is, the following table concludes all the trade setups during this experimental period.

Current Profit: -155.94

The Penguin Inside Day System (PIDS)

I have developed this system by reading hundreds of guides on the internet. And I mean hundreds.

After hard evaluation and analysis, I have improved it according to my experience during the trading of inside day.

In this section, I am going to detail every aspect of the system. Please read it carefully and read it again because it is important to understand the system before you implement it yourself.

First thing first, what is an inside day?

Inside Day Definition

In short, inside day is the inside bar formed on a daily chart.

Then what is an inside bar?

Inside bar is a candlestick that is fully contained by the previous candlestick, also known as mother bar. On some occasions, there can be more than 2 inside bars contained by the mother bar.

Following is the illustration of an inside bar.

An inside bar is valid as long as its low is higher than the mother bar’s low and its high is lower than the mother bar’s high. We are only observing the highs and lows of the mother bar and inside bar. Their form is irrelevant.

Valid Inside Bar Examples

I will show you a few more examples of a valid inside bar.

In example 1, we have both bearish candlesticks. The inside bar is a pin bar or a hammer which is in the range of the low and high of the previous candlestick. It is a very bearish signal. Nevertheless, an isolated case of an inside bar cannot tell us the whole story. This is a valid inside bar.

If you can tell a story from the candlestick then you are on your way to being a successful forex analyst. In example 2, the mother bar has rejected the bearish movement and formed a bearish pin bar. It is a sign that the market is pushed by the buyers. A bearish inside bar which is formed on the second day took all the buyers off the market. The current situation is pro bearish. Still, it is a valid inside bar.

In example 3, it is a bullish inside bar. The mother bar is a bullish candlestick and the trend is followed by the inside bar. This is another valid inside bar.

Invalid Inside Bar Examples

After seeing what an inside bar is, let’s look at what an inside bar is not.

In this example, the second bar’s high is higher than the first bar’s high. It makes it an invalid inside bar.

Needless to say much, in this example, the second bar’s low has broken the first bar’s low. It is, by definition, not an inside bar. I think we are super clear about the inside bar now.

Let’s move on to the next topic.

Why Inside Bar Trading?

According to what I have read online, inside day trading is one of the highest probability price action setup. It means that it is profitable if we use it in the right manner. What does the inside bar tell us? It tells us that the price on the inside bar is in the range of the high and low of the mother bar. It shows indecision in the market. In a trending market, it could mean that the market is having a short break.

Why do I choose inside day trading for this experiment? I have a few answers to that.

1. It is claimed to be one of the highest favorable price action patterns for forex trading. One of the purposes of this experiment is to support or debunk this statement.
2. It is beginner-friendly because of its easily recognizable pattern. That being said, it can minimize the risk of misinterpreting the pattern.
3. Inside day trading only requires me to be with the chart for a few minutes a day. It is a time saver. I believe it is also good for most of us because not everyone has all the time in the world.

If this experiment is proven to be a successful one, this can be the most profitable, easiest and most time-saving trading system. May the force be with us. 🙂

How To Trade Inside Bar Trading With PIDS

The formation of the inside bar itself has no use on its own. It needs to be traded as a trend continuation pattern or a trend reversal pattern. As I read online, there are a few things we should be aware of to have a successful trade setup. In short, I have listed out all the prerequisites for the inside bar trading.

1. It should be traded only with the daily time frame. Hence the name Inside Day.
2. The trend is our friend. Trading inside bar in the trending direction has a higher probability to win.
3. Avoid ranging market. It is deadly to the inside bar trading.
4. The inside bar can be traded at the breakout of the ranging market. It is when the price first breaks the range and then an inside bar is formed on the next day.
5. Support and Resistance levels are important as well. When the inside bar is at the key resistance or the key support level, it can be traded as a trend reversal setup.
6. The size of the mother candlestick matters. We do not want the size of the mother bar to be too small or too big.

My Own PIDS Procedure

After digesting all the information above, I have come out with my own PIDS procedure.

1. I am located in Malaysia so the New York market closes at 5:00 AM or 6:00 AM Malaysian time depending on whether it is on daylight saving mode. So, I will find out if there is any potential inside bar before I sleep. The next morning, I will confirm the inside bar. It should only take a few minutes for me to check all of the currency pairs.
2. If an inside bar exists, I will check the size of the mother bar. Since I am using the size of the mother bar to determine my stop loss level, I do not want the mother bar to be too big or too small. A small stop loss does not give the trade enough room to breath, while a large stop loss makes it difficult to reach the target simply because my target is usually 2 times the stop loss size.
3. Determine whether the market is a trending market, or if it is just experiencing a breakout from a series of consolidation. If the market is in a ranging market, I will not trade.
4. Find the nearest support or resistance level. If the market is trending or just experiencing a breakout, and the inside bar is formed at the support or resistance level, there is a possibility that the price could make a trend reversal movement. In this case, I will set up 2 pending orders, one buy stop order at the highest of the mother bar and one sell stop order at the lowest of the mother bar. I will let the market determine the direction. Otherwise, I will only open a pending order in the direction of the trend.

PIDS In A Flowchart

The procedure might seem complicated, so it is best to be illustrated in a picture.

The above chart shows you the whole process of the Penguin Inside Day System (PIDS). It is as simple as ABCD (Revised on 31st October 2019):

A. An inside day is detected.

B. The size of the mother bar must be bigger than the lowest ATR value in the last 14 days and it must be smaller than the highest ATR value in the last 14 days.

C. Only trade in a trending market or a breakout market.

D. Determine the pending order by looking at the EMA20. If the inside bar closed below EMA20, set a sell stop order and if the inside bar closed above EMA20, set a buy stop order. The pending order remains unless any of the future candlesticks closes below EMA20 for a buy stop order and above EMA20 for a sell stop order.

A good system is nothing without good money management. Let’s jump into the next topic.

Money Management

Good money management can save your trading account. It is about how much money you are willing to lose if a trade went bad.

In life, we are told to hope for the best and expect the worst. This principle is well fit for forex trading.

In any trade setup, the first question you should ask yourself is how much you can lose for this trade?

It is called the exit strategy. It is important to have the end in your mind.

Without a proper exit strategy, we will find ourselves going nowhere.

There are a few terms we often use in money management.

Risk Reward Ratio (RRR): It is the ratio between your risk and your reward. If your stop-loss is 100 pips and your take-profit is 200 pips, then your RRR is 1:2.

Lot Size: It is the size of the order to open. It is measured in lot. 1 standard lot is equal to $10 per pip.

Stop-Loss (SL): The desired risk in pips.

Take-Profit (TP): The desired reward in pips.

Example 1:

Ahmad has spotted a good setup. He is willing to risk $100 for this trade. And the RRR he has in mind is 1:2. His stop-loss will be 100 pips. So, what is the lot size, and the take-profit?

Assuming his account is a standard account which means 1 lot is equal to $10/pip.

Stop-loss = 100 pips

Risk = $100

Risk/Pip = $1/pip

So x lot = $1/pip

x lot = $1/pip divided by $10/pip = 0.1 lot.

And his take-profit is 200 pips because his RRR is 1:2.

What Is Good Money Management?

The purpose of money management is to protect the money we have in the forex account.

So, good money management preserves the balance of the account.

If you have $1000 in the trading account, money management will make sure that you have sufficient balance to trade for the longest time.

The common practice is to determine how much money you can lose in percentage.

Obviously, the less money you are risking in a trade, the more trades you can participate in.

Below are the common rules of good money management:

1. Risk no more than 2% of the total balance for every trade. Even if you are super unlucky, you can have at least more than 40 trades before your account is emptied.
2. Higher risk-reward ratio. The commonly used ratio are 1:2 or 1:3. With these risk-reward ratios, you do not need to have a high amount of winning trades.
3. Predetermine how much you like to lose per trade in the dollar value. Most people look at the pips value but I like it in the dollar value because you can feel the real value in the dollar rather than in pips.
4. Always use a stop loss. This is a common mistake that newbies do. A small loss is better than a big loss.

PIDS Money Management

Based on what we have learned above, every time I have a potential setup, I will use the following calculation:

Mother bar detail:

High: X

Low: Y

Range = (X-Y) Pips = Stop Loss

Lot Size (1 Instaforex Lot = 0.1 Standard Lot) = ($140/Range) Lot.

Example 2:

I spotted an opportunity. An inside day forms for GBP/USD. Everything is going according to the PIDS and I should set 2 pending positions because it forms near the key resistance level (Based on PIDS Flowchart).

Mother Bar Details:

High: 1.2300

Low: 1.2200

Calculation:

Range = 12300 – 12200 = 100 pips (Pips are based on the last decimal place)

Hence our stop loss is 100 pips.

And the lot size will be $140/100pips = 1.4 Lot

Since I have set a 1:2 Risk Reward Ratio for this experiment, the take profit will be 200 pips.

The 2 pending orders will look like the following:

Buy Stop 1.4 Lot @ 1.2300, SL: 1.2200, TP: 1.2500

Sell Stop 1.4 Lot @ 1.2200, SL: 1.2300, TP: 1.2000

These are oversimplified calculations. In real life, you might encounter lot sizes with many decimal places. I will only do calculations up to 2 decimal places.

Recap:

1. PIDS Flowchart is the core of this experiment.
2. I use PIDS Money Management for the calculation.
3. I will present the statistic only after 10 trades.

Statistics Of PIDS (Applicable After 10 Closed Trades)

Ps: There is not enough data to tabulate the statistics yet.

This journal will not be complete without summarizing the results as statistical data. These data are useful for all of us to determine:

1. Is inside bar trading profitable?
2. Which currency works the best with the inside bar?

Profitable Trade vs Lost Trade

In this section, we will extract the trade results from the successfully closed trades, be it a profit or a loss. I will show it in a pie chart and a table.

-A Pending pie chart in the pips value,

-A pending table in the dollar value.

Conclusion: In this section, I will conclude whether Inside Day Trading is profitable.

What Is The Most Profitable Currency Pair For Inside Bar Trading?

To get the percentage of the winning trade for each currency pair, I will compile it in the following table.

-table of currency pairs and its winning percentage,

-bar chart open trade vs winning trade for each currency pair.

Conclusion: In this section, I will determine which pair is the most profitable one.