Inside Bars

Inside bars (by definition) are completely overlapped by the prior bar and must be considered to be a small trading range. This usually makes them poor Signal Bars, unless they occur with trend or meet a couple more criteria.

Small bar at one end of a large trend bar

A Small bar at one end of a large bar is a setup for a fade of the large bar. The size of the inside bar is the most important criteria, it should be less than half the size of the outside bar (the bar that contains the inside bar).

If both bars have prominent tails, it makes sense to wait for a second entry (2E) instead. If there is confluence, take the 1st entry. Like in the below example there is a failed breakout of the bear trend line and a possible double top lower high.

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Reversal Signal Entry Strategies

There are several ways to enter a trade on a reversal signal. All have advantages and disadvantages and finally depend on the market context and the trader. This post only represents a small selection of possible entry methods and doesn’t cover scale-in type of trade entries or trading a penetration of a micro trend line.
To find reversal signals, you can use the Reversal Signal Bars indicator. Continue reading “Reversal Signal Entry Strategies”