Tuesday, August 2, 2011

Inside bar after breakout bar

After a breakout in a direction, there is usually an attempt by the traders in the opposite direction to make a stand. This could result in a reversal bar, an inside bar or a small bar depending on the strength of the traders trying to fade the breakout.

A reversal bar after breakout usually implies a failure of the breakout and the failure is a decent with-trend signal by itself but is enhanced by being near a barrier such as ema (b59) or near a trendline (b36) or being a breakout test and so on.

A trend bar, especially a small trend bar after a breakout (b18) represents success of the breakout and may be entered with-trend if the bar size is small enough to represent moderate risk (around 2 points for normal day).

An inside bar after a breakout (b39, b51,b74,b76) represents a pullback and a possible failure and can be bracketed to trade either way. If both the breakout bar and the inside bar are bearish, its generally a good idea to take the trade only with-trend. If the inside bar after a bear bar is the bullish, it can be bracketed.


  1. Bracketing is having stop orders 1t above and below a bar to enter on either side on breakout.

  2. Another good post.

    b1 is trend from 1st bar long. Is this something you take all the time or skip sometimes as I have seen in some of your charts you take and some charts you don't. Curious on what scenarios you decide not to take?

    1 Rev you marked in the chart, that would be bar 5 right which is a loser. I see you marked b7 as 1 Rev.

    Was there a reason you skipped taking both the 1Rev as well as the 1PB (both high probability trades)?


  3. Buster, I rarely short below bull bars. The first short signal is correctly marked 1Rev