Sunday, 14 July 2019

3 Common Trading Mistakes Inside the Bar

Although it is considered the most readable and applied pattern in trading, it seems that some traders still often misunderstand how to use the Inside Bar correctly. According to Nial Fuller at learntotradethemarket [dot] com, there are 3 common mistakes traders often make when using this pattern. Anything?

1. Don't Use Inside Bar on the Daily Chart

According to Nial, the daily chart (Daily) is considered an appropriate and convenient timeframe to use, especially for Price Action traders who tend to pay attention to the candle pattern. Well, if your trading type focuses on the appearance of the Inside Bar on the chart, then don't use it at a lower timeframe. Why is that?

If you are trading with the Price Action method, the signals generated at low timeframes usually contain a lot of noise. As a result, the signal pointed to by the Inside Bar may be deceptive; seems valid, but apparently failed to generate profit (Failed Signals). In addition to the risk of Failed Signals, trading Inside Bar at smaller timeframes also triggers overtrading. Traders will tend to be tempted to enter, seeing that there are many trading signals popping up. In fact, the possibility of being able to profit is very small.

2. The Inside Bar Is Not Used For Trend Following

Practically, trading that is in line with trend following is considered easier in reaching profit. Also, in the long run, trading by following a trend can be very profitable for traders who know how to manage emotions and position well. Similarly, the Inside Bar should be used for the Trend Following strategy. Although this pattern tends to mark the occurrence of Reversal, but its appearance in forwarding the trend will be very useful.

According to Nial, the appearance of Inside Bar in a series of long trend rallies can be a marker of continuation. This pattern can be used as signposts for Breakout, and can provide a greater chance of Risk Reward Ratio. Of course both of these benefits can be obtained if you use Inside Bar to trade following trends.

3. Installing Stop Loss Too Close to the Mother Bar

For some traders, installing a Stop Loss level when entry means that they are ready for the losses to be received. On the other hand, there are also traders who do not use Stop Loss at all, with the reason that they want to follow the determined Money Management. Both are fine, given the importance of installing a Stop Loss when the entry returns to the trading strategy used.

In relation to Inside Bar, apparently there are many traders who put Stop Loss too close to the main candle, even though for entry, traders also use the Mother Bar as a reference. Installation of Stop Loss levels that are too close to the entry point is not recommended, because the potential to be "expelled" from the market immediately is also greater.

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