Outside Bar Archives • Futures Day Trading Strategies

Posts Tagged Under: Outside Bar

How to use price action to exit your trades

 

When it comes to exiting trades, some traders may have room for improvement in their approach and strategy. In this article we highlight some simple, yet often overlooked, price action principles that can help you understand when a trend is over and likely to reverse.

 

Exiting Trades using Wicks – Candlestick Rejections

Wicks after a long trending phase may point out that the trend is losing strength. In the screenshot below you can see how multiple wicks to the downside after the strong sell-off foreshadowed the bullish reversal.

The wicks show that sellers tried to move price lower to continue the downtrend, but sellers didn’t have enough power and buyers stepped it to absorb all sell orders and keep price up. Finally, sellers gave up completely and buyers moved price higher.

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Reading Market Sentiment with Price Bars – Inside and Engulfing

 

While some might argue that candlesticks are just a snapshot of market activity without any true meaning and with even less forecasting value, the trader who can interpret the subtle clues provided by candlesticks and price formations can increase their odds.

In this article, we want to explore two of the most commonly used three-bar price patterns – the inside bar and the engulfing pattern. In contrast to other candlestick patterns, the three-bar formations put more emphasis on market context and thus, allow traders to understand what is going on inside price.

 

The Inside bar

The inside bar shows a market contraction and a consolidation period often just before a reversal. The inside bar pattern consists of three candlesticks where the second forms completely inside the previous bar, hence the name. The small candle inside the larger previous one shows the contraction and a period of market indecision.

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