Basic Details Of The Setup
An inside bar is spotted on 14th August 2019.
Please click on the chart 1 to see the image.
Overall Trend: Bearish.
GBP/USD had just gone through consolidation from 31st July until 8th August. On 9th August, a bearish breakout happened. On 14th August, an inside bar is spotted.
Mother bar prices:
High: 1.2106
Low: 1.2014
The range of the mother bar is about 92 pips. It is a good range to place an order.
There are 2 possibilities where the price would skew to. Even though the overall price is still bearish, it has plenty of space before the price hits the nearest resistance at 1.2402.
Hence I have set 2 pending orders.
I have chosen 100 pips for stop loss since the range of the mother bar is only 92 pips.
The risk I am willing to put down is $140 (2% of my $7000 in account balance). All the value is in Cent because I am running this experiment with a Cent account.
100 pips for $140. So it is $1.4/pip. At InstaForex, 1 lot size of the order is $1/pip. So, for $1.4/pip, the lot size is 1.4 lot.
After all the petty calculations, I have opened 2 pending orders:
Buy Stop 1.4 lot @ 1.21.06, SL: 1.2006, TP: 1.2306
Sell Stop 1.4 lot @ 1.2014, SL: 1.2114, TP: 1.1814
Progress Of The Orders
Please click on chart 2 to see the image.
Day 1: 14th August 2019
2 pending orders in the opposite directions are set. Nothing significant happened today. It finished the day by forming a small pin bar. Another inside bar was formed. This shows that the price is going nowhere. If the price still lingers within the range of the mother bar the next day, it is a sign of a ranging market. Both orders will be closed because inside bar trading is only good when the market is trending.
Day 2: 15th August 2019
A bullish candlestick is formed. And it triggered the buy stop pending order. It is officially an ongoing trade. The sell stop pending order is then closed. The candlestick ends its day by closing in the range of the mother candle. It is not any positive sign for the setup. It shows that the price is still in the consolidation state.
Day 3: 16th August 2019
The price has officially broken the consolidation range of mother candle but it has entered the range of previous 8-day ranging market, labeled as A. It is at least a positive signal that the price has moved away from our stop loss range (in pink).
Day 4: 19th August 2019
It was a Monday. As usual, we do not expect a lot of activities on Mondays. A fresh inside bar is formed. It tells us that the market is still indecisive. It is ok for me, as long as it stays away from the stop loss range.
Day 5: 20 August 2019
Something happened here. The price broke down to our stop loss range and then went back up to our range A. It was a strong bullish signal. If we were not in the position before, I might have opened a long trade based on the previous inside bar since the short term trend was bullish. Overall it was a good bullish push. If we were to stare at the chart a whole day long, our hearts might not be able to take it. My advice is that we look at the chart only twice a day. Once at night before we go to bed, to see whether there is a potential inside bar for the next day, and another time when we wake up early in the morning to confirm the inside bar. By doing this, we can avoid a lot of unnecessary emotional stress.
Day 6: 21 August 2019
It was a bearish day. And it was again indecisive. Another inside bar was formed. It could be another good long trade setup. But since we were already in the position, we do not need to do anything about the newly formed inside bar. Anyway, the price has not yet left the range A. Perhaps it might stay there for a few more days. Nothing we can do about it. Just wait and see.
Day 7: 22 August 2019
The market has finally made a huge 164 pips bullish move. And it has officially broken the range A. It is a super positive view to us. We were about 50 pips before reaching the target. 3/4 of the job is done. But of course, we cannot celebrate yet, as anything could happen the next day.
Day 8: 23 August 2019
The bullish move has continued. It went down first before going up and closed higher than the previous day. We are 20 pips away from our target. So near yet so far.
Day 9: 26 August 2019
The market has taken it all back. It has canceled all the bullish move on the 8th day. It was a super bearish day. It was a Monday blue for us.
Day 10: 27 August 2019
This was the day. The price rushed up 3 pips above our take profit and closed below it. We have finished our 10 days long trade setup. It was a good 10 days.
Overview Of The Setup
A picture says a thousand words. Look at this image and tell your own story with it. Once you know how to tell a story out of a chart, you are on your way to being a great market analyst.
Conclusion
From this trade, I have made 200 pips profit which is equivalent to $280.
One thing that I have learned is that, after a strong breakout from a series of consolidation, the direction of the market can either go north or go south. It was a great move that I have set up 2 pending orders. From there onwards, we let the market decide.
It is also a gut feeling. Usually, we set the pending order according to the trend direction, but sometimes, especially near the resistance/support level, or an overbought/oversold area (no resistance or support level exist in the past 6 months), we will set 2 directional pending orders.
In our example, the last support level at the low of the mother bar was on 16th January 2017. It is almost 3 years ago. It has caused an indecisive market. It was also clearly oversold. Even though the current trend is strongly bearish, but as I said, near the resistance/support level, or when the market is overbought/oversold, the price can be indecisive.
When that happens, let the market decide for us.
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I am Engedi, glad to have you on board.
