Basic Details Of The Setup
An inside bar is observed on 20th August 2019.
Please click on the image to see the better version of the image.
Overall Trend: Bearish
GBP/JPY is bearish since May 2019. The price consolidated for 4 days before a breakout happened on the 9th of August. On 20th August, an inside bar is spotted.
Mother bar prices:
High: 129.55
Low: 128.13
The range of the mother bar is 142 pips. It is a good range for GBP/JPY as it is a fast-moving pair.
Was the inside bar formed around any support and resistance? Yes, It was a strong support/resistance level around July-November 2016. And now clearly the price is oversold because of its bearish movement since May 2019.
In this situation, when the market is too oversold or overbought, it has the potential to break out in either direction. So we cannot choose only the direction of the trend.
Hence I set up 2 pending orders.
I have chosen 142 pips as my stop loss. As usual, the dollar amount that I am willing to lose is $140 (2% from the $7000 I have in the account).
I am using the Instaforex cent account to trade this. So the lot size I should use is 1 lot (At Instaforex, for 1 lot of order, it is $1/pip. For other brokers, generally for 1 lot, it is $10/pip)
The pending orders are:
Buy Stop 1.0 Lot @ 129.55, SL: 128.13, TP: 132.39
Sell Stop 1.0 Lot @ 128.13, SL: 129.55, TP: 125.29
Progress Of The Orders
Please click on chart 2 to see the clearer image.
Day 1: 20th August 2019
I have opened 2 pending orders in a different direction. And the market has agreed that it should be going up by forming a nice pin bar at the end of the day. Buy stop order is opened. And I closed the sell stop order.
Day 2: 21st August 2019
Nothing much has happened. The market was very slow. Another indecision appeared.
Day 3: 22nd August 2019
Finally, the price has decided that it should go up a little bit further. A nice bullish candlestick is formed. The buyers have taken over the market. It was good for me. I was a little bit positive at that moment. Positive in pips as well as with this order.
Day 4: 23rd August 2019
It was a bearish day. An inside bar is formed here. It showed that the market was once again indecisive. The price closed a little bit lower than my entry point. At this point, I had no idea what will happen to this trade. It was consolidating.
Day 5: 26th August 2019
The order was almost closed. It was 3 pips before the stop loss and shot up again to form a bullish pin bar. Although it was bullish, it wasn’t strong enough to go higher than the previous candlestick’s high. The price closed just above the entry point. Again, it showed that the market was in the consolidation. This was a situation that we should never open a position. We can win a trade when it is trending because the trend is our friend. But in the ranging market, we might lose it because of the nature of the break out strategy.
Day 6: 27th August 2019
A small bullish candlestick was formed. And the price closed higher than the previous day’s closing price. Although so, the price was still in the range of day 4 inside bar. It was clear that the market had no direction.
Day 7: 28th August 2019
A pin bar was formed. The price was super bearish in the beginning but then later the buyers were in control again. Hence a pin bar was formed. The price closed just around the entry point. This trade has gone nowhere after so many days of waiting. This was an example of why the ranging market is so exhausting. We can only wait and wait and wait.
Day 8: 29th August 2019
Another small pin bar appeared. It was smaller than the previous day pin bar. And it was also an inside bar. If I were not in any position, this was a no go inside bar setup. The market was consolidating.
Day 9: 30th August 2019
Another inside bar was formed. As I said, the market has no direction at all. If you are trading inside bar as well, my advice is that do not take this trade.
Day 10: 2nd September 2019
Finally, this was the day. The market has decided to end the agony of this trade by closing it resulting in the loss of 142 pips.
Overview Of The Setup
What do you think of this setup? Can you tell me a better story from the image below? Please leave your comments in the comment section below.
Conclusion
From this trade, I have made 142 pips loss which is equivalent to $133.50.
What I have learned in this trade is that for inside bar strategy, the ranging market can be the worst enemy. Not only it can result in loss it also can take away the patience of the trader. That’s why we should avoid the ranging market at all costs.
I still believe it was a good setup. I had a lot of fun looking at the chart. A losing trade serves as a reminder that even a good setup can fail. It is okay to lose. Because we always have the end goal in mind. We have already known that we can afford to lose that amount of money even before we open a trade.
With the risk-reward ratio of 1:2, we only need to win 40% of all time to make a profit. This is also the goal of this experiment, to see whether this strategy can let us win 40% of the time.
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I am Engedi, talk to you next time.
