Introduction
The Forex market, with a daily turnover of $5 trillion, is the largest of the financial markets. It is an avenue to buy and sell currencies while seeking to profit from the movements in the currencies’ exchange rates. These fluctuations, oftentimes, are caused by changes in the monetary and economic policies of nations. Sometimes, their effects can be so drastic that market moves form new highs and lows.
That is, Forex signals are highly volatile and there are intense swings in price every day. While these swings create opportunities for Forex traders to profit from, they can also result in losses for them. This is why traders in the Forex market are always advised to be patient, knowledgeable, and skillful so that they do not know only how to make money in it, but also how to manage its risks. Both are easy to do when the market moves in trend.
However, what do you do when the market is ranging? How do you identify profitable opportunities in the Forex market when it does not seem to be in a clear trend? That is, when it is consolidating and is neither in an uptrend or a downtrend? The answer is Inside Day Trading Strategy! This strategy, because of its unique usefulness in the analysis of short-term price movements can help you make a lot of money from the Forex market — even when its pattern is not that clear!
In this article, we will teach you how to use it.
Inside Day Trading Strategy: What is it?
So, what is the Inside Day Trading Strategy? Well, it is as named. When you do Inside Day Trading, your goal is to analyse candlestick patterns formed in a day. Thus, you seek to know the Open, High, Low, and Close price of the previous and current trading days for a particular currency pair. In doing this, the Inside Day Bar of the previous trading day is the most important detail you watch.
The Inside Day Trading Strategy has grown in popularity to become mainly applied to consolidating markets just before they break out. Hence, it is primarily used to identify perfect breakout opportunities in high-volatility markets that seem to have no trend pattern.
Trading the Forex Market with Inside Day Trading Strategy
So, how do you trade the Forex market with the Inside Day Trading Strategy? It is easy. But before you go to the charts to use it, you should take note of the following tips:
- Even though the inside bar patterns change with
volatility and they can be formed on any time frame, the strategy is most
effective with a higher-time frame such as the daily time frame.
- The strategy works best in highly volatile markets
that do not seem to trend. But when there is a trend to the market, you can
still use the Inside Day Trading Style by simply following the trend and
looking for potential reversals.
- The Inside Day Trading Strategy is based on
breakouts. However, to prevent traps, enter only when you have confirmed that
the breakouts are of high momentum.
- Finally, to protect yourself from false signals, it is advised that you use a risk-reward ratio of 1:3. That is, you should risk 1 pip for every 3 pips you want to gain.
Now, here are the steps.
©PriceAction.
- For a buy signal, look for a support area and pin bar
and inside bar reversals.
Place your buy order.
©PriceAction.
- For a sell signal, look for a resistance area and an inside bar reversal pattern. Note that the more that the resistance has been tested before, the stronger it is. This pattern can be a good opportunity to sell.
©PriceAction.
Breakouts are traders’ darling. Why? Because they present easy, clear
opportunities for them to grab! They indicate changes in the supply and demand
dynamics of the currency pairs being traded. When sellers are taking control,
for example, an uptrend will start ageing. The greatest bulk of the trades
being made at such a stage will be in the opposite direction of the prevailing
trend. So, soon the uptrend will reverse.
The Inside Day Trading Strategy works perfectly well for catching reversal breakouts. However, you should be careful of fakeouts. How? First, fakeouts are more common when there is no major economic event or news that will sustain traders’ sentiment in the new market direction. In such situations, fakeouts eventually reverse and the previous trend continues. Nevertheless, fakeouts also offer some of the best money-making opportunities in the Forex market.
Institutional investors, for example, fade breakouts a lot. That is, they trade opposite to breakouts. They do so because sometimes, ostensible breakouts from support and resistance levels (fakeouts!) are unsustainable, and often reverse. By virtue of the huge capital sizes that these traders control, following them is like following the money. However, you should still never let that cloud your judgement of the overall market sentiment and your own common sense.
In conclusion, the Inside Day Trading Strategy, indeed, is effective. Its profit potential is high, yet the associated risk is low. Its unique characteristics especially make it especially ideal for consolidating market situations. However, it is important you note that no strategy has 100% accuracy. Hence, you might want to use a signal service to complement your trading.
To that effect, 1000pip Builder is all you need. Their signals, birthed from expert analyses, are 5-star rated and independently verified by MyFXBook. You can sign up for their membership plan here.
