Basic Details Of The Setup
I have spotted an inside bar on 4th November 2019.
This setup is the first setup since I revise the Penguin Inside Day System. I have added EMA20 as the trend indicator and ATR (14) as the trade filter.
The overall trend for AUD/USD is currently bullish. It has just broken up its nearest resistance level recently (I did not show it on chart 1).
The mother bar details:
High: 0.6931
Low: 0.6885
Range: 46 pips
I am using ATR (14) as the trade filter. The value of the ATR (14) in the past 2 weeks are:
High: 51 pips
Low: 42 pips
So the trade is valid because the mother bar size (46pips) is within the range of 42 pips and 51 pips.
Now I am using EMA 20 as the trend indicators. If the inside bar forms above the EMA 20, I will set a buy stop order and vice versa.
In our case, the inside bar is above EMA 20.
So it is a buy stop order. The lot size of the trade is $140/46pips = 3.04 lot.
The pending order:
Buy Stop 3.04 lot @ 0.6931, SL: 0.6885, TP: 0.7023
Progress Of The Orders
Day 1: 4th November 2019
My pending order is not triggered. Instead, it went actually south. It feels that the market is in a temporary ranging market.
Day 2: 5th November 2019
The buy stop order is hit not because the price reached the 0.6931, but because of the spread of 3 pips, the order is triggered when the price is at 0.6931. I think I should try using the account with zero spread but with commission. The entry point is more accurate. Anyway, this position went south after it is opened. It ended in a pretty quick loss. Bad trade.
Overview Of The Setup
Check this out. I have cropped off the unnecessary area of the chart.
Conclusion
I am not sure what I am learning here. The trade went wrong too quickly. It gave me not enough time to experience anything. Perhaps there is one thing I can consider. It is the distance of the price with the EMA. I do not want to assume anything yet. It is just an observation. If the distance between the EMA 20 and the inside bar is big, there is a possibility for the trade to not work unless it is in a very strong trend.
We know that EMA is a trend indicator which also is an average indicator. It shows the average price of the currency pair in a given amount of time. It is logical for price to move back to the EMA if the gap is big. Unless the trend is very strong.
I will keep it as an observation for now.
Talk to you soon.
Engedi.
