Inside day candlestick pattern is pretty good when it comes to catching big breakouts. But not always. There are many false inside day patterns. You need to learn how to filter the false inside day patterns from the true ones. In the video below Dale Woods shows how he traded a double inside day pattern on EURGBP and made $10K.
Dale Woods is a professional trader who focuses on candlestick patterns and price action when it comes to trading. In the above video you can see that first he finds the market structure. Market structure means determining what the market has been doing and what it looks like it will do. Drawing trendlines and finding probable areas of support and resistance on the daily, weekly charts is part of finding the market structure.
As said inside day patterns are good when it comes to finding a breakout trade. Breakout trade means catching a big move in the market. Inside day is a signal that price is finding it hard to break a support/resistance level. Rest you need to use your common sense and look at the other factors before blindly opening a trade.
In the above video, you can see Dale Wood has drawn a trendline and the double inside day pattern is forming just above that trendline which is a signal that price is finding resistance at the trendline.Trendlines are simple. Surprisingly markets respect trendlines a lot. Why? Maybe because a lot of traders use trendlines. There is no other explanation that comes to my mind that explains why market respects trendlines.
Markets respect fibonacci levels? Why? Because a lot of traders use fibonacci levels to make their trading decision. Trendlines and fibonacci are subjective things. Different trades will draw different trendlines. Different traders will draw different fibonacci levels. With experience you will learn how to draw the best trendline. With experience you will also learn how to draw best fibonacci levels. So we can say trendlines and fibonacci are sort of self fulfilling prophecies.
As you can see in the above video, Dale Woods just like us uses candlestick patterns. Always make sure you let the candlestick close before you make any decision. A candlestick can change shape in the last few minutes so never make the mistake of opening a trade when the candlestick is not fully formed. Candlestick patterns on weekly, daily and H4 patterns are more reliable as compared to candlestick patterns on H1, M30, M15 and M5. Daily candle is very important.
The most important thing for you is to manage the risk properly. Always look for trades that have at least 3:1 reward to risk ratio. What this means is that if you are risking 30 pips then you must make 90-100 pips. Now when you trade on daily timeframe it is difficult to open a trade with a risk of 30 pips. We suggest that you use H4 timeframe for opening and closing trades. This will help you reduce the risk.
Risk Management Is The Most Important Thing
An H4 candle encompasses four hours of price action. So the signal generated on H4 chart is much more strong as compared to the signal generated on H1 chart. Another thing that you can see in the above video is that after the formation of the double inside day pattern price broke the resistance level formed by the inside day pattern. After breaking high of the inside day pattern, price breaks out in the down direction. So make sure where you place the stop loss. If you had placed the stop loss just above the high of the inside day pattern, it will have been taken out. So make sure you choose your stop loss level with a lot of care. Read about a GBPUSD swing trade that made 400% in 14 days. In this post we show how to manage the risk and make a high return. In the post we show that the most important thing is risk management. If you can manage the risk properly you will be able to make high returns. Sp focus on risk management. When you have learned risk management you are all set to make a fortune. Sometimes market behaves in strange ways. That’s why you need to always take risk management seriously. Read how GBPNZD rose 1600 pips then fell 1000 pips in just 2 minutes. So sometimes market can be highly volatile.