Hello and welcome to another FX Forex FX Forex trading tutorial.
Today we have an opportunity to look at some simple inside bar trading strategies. The green dots that you see in the video above show us inside bars on the daily EURUSD chart.
How this would work is very simple the first let’s take a closer look at an inside bar. What defines an inside bar is that the high is lower than the previous high and the low is higher than the previous low.
There are a number of different strategies you can use to trade inside bars. Let’s take a look at a very simple one right now. Just as an example we could easily trade the breakout of the range of the inside bar. This means when the price goes above the high of the inside bar we would buy and be long or the price goes below the low of the inside bar we would sell or be short.
The nice thing about inside bar breakouts and trading is that you can use the other side of the inside bar’s range define your stop loss. This means that when we go long on the breaout of the high of an inside bar the low of that bar defines our stop loss.
As far as risk control is concerned the range of the inside bar or bar prior to the inside bar is particularly important. Why? Because based upon your account size you have to take the level of risk into consideration. There may be inside bars that simply may be outside of your particular risk parameters. Let’s say you are looking to trade and have your risk at say 5% of your total account per trade. Let’s go a bit further and say that your account size is $10,000. 5% of that would be $500 and if you are trading 1 standard lot that translates into 50 pips of risk. If your inside bar strategy identifies a bar with a range of 230 pips this would translate into $2300 using a standard lot. Quite obviously, trading a standard lot would be out of the question.
Regardless of how great the trade looks it needs to fit within your risk parameters in order to continue to trade. This means that we must preserve our capital and when we preserve our capital we can continue to trade. This gives us the ability to take advantage of many excellent trading opportunitiesthat will present themselves in the future.
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