What to do with “Barb Wire”?

Barb Wire” is a special kind of a tight trading range, where the price action is confined to a narrow range made up of small bars, many of which are dojis (large tails and small bodies).

Without a lot of experience it’s best to avoid trading “barb wire”. There is no real way to trade “barb wire” except to fade a breakout or trade a breakout pullback of it. This is because “barb wire” is a tight trading range and most trading range breakouts fail.

Tight trading ranges usually are continuation patterns, although after a climax or trend channel line overshoot (too far too fast) price can breakout in either direction.

If the overall context is supportive and the Signal Bar for the trade is good, the probability for a profitable trade is better than 50/50. A supportive context can be:

  • Failed breakout below “barb wire” in a bull trend (continuation)
  • Failed breakout above “barb wire” in a bear trend (continuation)
  • Failed breakout below “barb wire” after a sell climax (SX and possible reversal)
  • Failed breakout above “barb wire” after a buy climax (BX and possible reversal)
  • Breakout pullback from “barb wire” in the direction of a prior trend (continuation)

Strengtheners for the trade can be e.g. a Tick Breakout Failure, Buying/Selling Pressure, a Breakout Test or support/resistance like HOY, LOY, COY to name a few.

 

You can use the Reversal Signal Bars indicator to show Barb Wire on the chart.

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