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Unlike the pin bar, the inside bar is best traded as a continuation pattern. This means we want to use a pending order to trade a breakout in the direction of the major trend.
Notice how the bar preceding the inside bar is much larger in size. These are the best inside bars to trade because it shows a true consolidation period which often leads to a continuation of the major trend, which in this case is up. This strategy is different than most of the conventional breakout strategies out there. The opportunity to trade this pattern occurs when the market breaks to either side and then retests the level as new support or resistance.
In the case of the illustration above, the entry would have come on a retest of support-turned-resistance. Notice how in the USDJPY 4 hour chart above, the market touched the upper and lower boundaries of the wedge several times before eventually breaking lower.
As soon as the 4 hour bar closed below support, we could have looked for an entry on a retest of former support, which came just a few hours later. Although the pin bar trading strategy is my favorite, I have had some of my largest trades using the Forex breakout strategy above.
The market will often react quite aggressively after the breakout occurs, allowing traders to secure a large profit in a relatively short period of time.
So there you have it. Three simple Forex trading strategies for beginners. These strategies are by far my favorite and for good reason. Please see attached screenshot. Type your email so you will receive update whenever I post. Don't forget to "confirm" in the email to complete the subscription.
Sections of this page. Email or Phone Password Forgot account? Join Group settings More. One of the students just did: Joel Tagle shared a link. The Emperor's New Clothes. The National Bureau of Investigation has apprehended several people for their supposed involvement in an illegal online trading company operating in the Bonifacio Global City.
Jae-Ae Samson is with Ronald Gapuz and 5 others. However, the same works in an impulsive move. They are most likely part of a bigger degree corrective wave, like a zigzag or a zigzag family pattern. Combining Bollinger Bands and the Elliott Waves, you increase the chances to trade corrective waves more than impulsive moves. In both cases, a breakout shows the right direction. As mentioned earlier, the price is spending most of the time, more than ninety percent of it, within the UBB and LBB lines.
A breakout, therefore, is a heads up for the move to come. However, fake moves can appear. Algorithmic traders or robots govern trading these days. They execute thousands of trades per second and run on supercomputers. Humans are following robots for a few decades now, and this is not going to change anytime soon. Technological advances and the speed the industry is changing will allow for more and more spikes in volatility to occur. Based on this article, volatility is best measured with the Bollinger Bands indicator.
The key to staying profitable is to quickly reverse a position when a fake breakout occurs. What traders are doing is they try to identify ranging and trending conditions with the Bollinger Bands. It is the smallest distance on the whole chart, signaling the fact that a break is imminent.
It shows a period more than two months where price simply consolidated, between August and October For traders using pattern recognition to spot trades, that period shows a triangle.
The next step is to go and do some back-testing on historical data. But have two conditions in mind: The idea behind back-testing this is to see if similar small distances between the UBB and LBB lead to important breakouts that you can trade just like the example above shows. Different currency pairs have different volatility levels, as not all pairs are moving in the same way. Liquidity plays an important role, and the trading session as well. Below you will see a trading example that includes the Bollinger Bands indicator.
This is a video that shows how to use the indicator successfully. I entered a long trade based on bullish signals of the Bollinger Bands. This is an opportunity to observe the Bollinger Bands indicator in action.
And the best thing is that you can see the video for free. You only need to add your email and names to play the video. At the same time, the two bands were expanding signalizing that the volatility is increasing. I opened a long trade placing a Stop Loss order on a relative distance. Then, I stayed in the trade until the price broke the middle band in bearish direction. It was enough for me to see a break through the middle band. And the reason for this is that the two bands were shrinking at that time, meaning that the volatility was decreasing.
To sum up, the Bollinger Bands indicator is a great tool to analyze a currency pair. This way, the Bollinger Bands will act as a confirmation and will bring more confidence to the overall trading process. In the end, trading is a game of probabilities. And it is not possible to have one hundred percent winning trades. What matters is the trading account to grow in time. Profitable trading is the result of mastering the available trading tools. The Bollinger Bands indicator is perfect for that.
During his bachelor and master programs, Damyan has been working in the area of financial markets as a Market Analyst and Forex Writer. He is the author of thousands of educational and analytical articles for traders.
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