Inside day trading a highly popular Forex trading strategy. Forex is a highly volatile market and trading in Forex market requires skills, experience and profitable strategies or a professional guide. Inside day trading strategy is a highly effective trading strategy which helps a trader to trade in a security which is in a range or in a consolidation stage.
Forex market deals is different currencies and traders trade in Forex market in currency pairs where one currency is traded against another currency thus the movement in these currency pairs usually happens in a swinging manner as the economic, fiscal and political scenario which shapes the Forex market do not usually change overnight which affect the price movement in the currency pairs and this is where Inside Day trading comes in play due to its unique characteristics on analyzing the short price movements which helps a trader to select profitable trades. In this blog we are going to explain the Inside Day trading strategy and we will also explain how a trader can use this to make money out of the market.
What is inside Day trading Strategy
As the name suggest inside day trading strategy is a trading system where we analyze the candlestick pattern which is formed within a day, or a study of the candlestick patterns made within the space of open, high and low of previous day and current day is called the Inside day trading.
In inside day trading strategy trader do a analysis of the candlestick patters which is formed under the previous days candle high and lows limits. This strategy is a very useful strategy which works in most of the financial markets. As price tends to consolidate within a tight range before giving a breakout and give a massive movement this strategy helps a trader to spot and catch a perfect breakout in a low volatile market where the market sentiments are not clear. In Inside day trading strategy the OHLC of preset days candle forms completely under or “inside” the OHKC off the previous day, this is the pattern which is called the Insider Day Bar, where the previous day’s candlestick is called the Mother bar or base bar.
How to trade inside day pattern
Inside day patterns form in the Forex market very frequently but one thing every trader should note is that not all the inside day pattern breakout turn out to be a profitable trade, sometimes the breakout is a fake breakout which may trap a trader. Below we have mentioned few important points ever trader should consider before trading inside day pattern.
• The time frame and frequency of trading the inside bar patterns changes in line with the trades level of activity. An inside day trading pattern can be formed in various timeframes, however the most popular timeframe to trade an inside day pattern in daily.
• Highly liquid and volatile trading instruments are the best fit for the inside day trading strategy and a trade should always focus on the major currency pair in the Forex market to get the most out of the market with the help of the inside day trading strategy.
• It is a widely known fact that a trader should always follow the major trend and that is also the thumb rule for inside day trading as well. A trader should always follow the trend in order to minimize the losses and maximize the profit potential
• Always enter in the market at the time on high momentum along with a strong breakout. A breakout without momentum is like a rocket without fuel. A trader must consider the momentum in the market and trader accordingly and set the trade timing according to the market movement.
How to set Stop-losses and Profit taking
Inside day strategy is a very useful and easy to understand strategy which offers one of the simplest and clearly visible stop loss levels. The stop loss in the inside day trading strategy should always be below a few points below or above the last days or mother day candles high or lows.
On the other hand in inside day breakouts trading strategy offer a highly effective risk and reward system which not only limits the risk but also ensure high reward. Because of a high risk and reward ratio, this trading strategy is the most popular trading strategy in the Forex market where the majority of forex traders use this strategy to make money from the market. The profit booking levels in this trading strategy should always be three times from the risk we have taken in the trade to ensure profits even in low accuracy of trade decisions.
The Bottom Line
Inside day trading strategy is one of the simplest and most popular trading strategies in the Forex market where a huge number of Forex trader use this strategy on a daily basis because of its unique characteristics which makes it perfect for Forex day traders. The simplicity of inside day trading strategy, along with the high risk and reward ratio makes it an ideal match for forex day traders who wants to make money out of the market. The high-profit potential and comparatively low risk makes inside day breakout trading strategy a popular and effective trading strategy.
However, we should understand that in the market noting can offer you a hundred percent accuracy level and this trading strategy also doesn’t claim to be an always money-making strategy. Sometimes inside day breakout also fails and turn out to be a losing trader but that doesn’t decrease the reliability of the trading system as the high risk and reward ratio of inside day breakout trading strategy makes it a profitable system even at times of poor accuracy of the trading decision.