For short case, if the stop loss is hit i.e. the PDH. Can we re-enter the long here since it broke the previous day high? And vice versa!
No. When the first stop-loss is hit. Think of the other traders. Everyone is confused. They would rather just leave the stock and wait for proper breakout or breakdown supported by other theory. Till then, they will see other stocks. There are many stocks in the watchlist.
Is this only for intraday or positional also?
Inside bar depends on the time frame. If you are doing in a smaller time frame like 5m; it will be obviously chaos and more lunatic. You can then use any trailing stop loss method and if the TSL doesn’t hit, one can convert it to delivery trade too! It totally varies from person to person. Or, one can close it EOD and prepare new watchlist next day!
If Inside Bar is formed near support and buy triggers, then positional trade can be done?
Yes. Near Support and Resistance, you will always look for the technical entry. This is it. Now follow trailing stop loss method and convert it to positional. Or, you can do intraday too. The point here is Inside bar near technical support and resistance or near whole numbers like 400,4000 are a too strong and good trade.
What about gap opening above or below inside bar candle?
In case it gaps up, we need to follow the opening range breakout method to get an entry. Opening range breakout method will supersede inside bar always. Inside bar strategy gives entry when the price crosses itself the high or low. Gap up or down will invalidate that.
Some days there are more than 50 IB F&O stocks. Does someone have to go through all to identify the stocks or volume can be used as a parameter to shorten the list?
The harder you do the homework, the better.
Always start with nested inside bars. Three inside bar or more than that has to be always manually checked.
- The stock having an inside bar and fallen the most has to be checked.
- The stock having an inside bar and risen the most has to be checked.
- The stock having an inside bar and has the highest volume has to be checked.
If the watchlist has 5 trades, that should be more than enough for that day.
So pennant case is more powerful as it creates more impatience?
Pennants are a price action pattern. Pennant means more impatience because pennant consists of a pole and a pennant.
The pole creates tension as there will be people sitting with good profit wanting to close (who caught the breakout that made that pole). There will be people who will bet on retracement (mean reversion traders). So yes!
Do you normally put limit orders for PDL or PDH or track the stock continuously for a break and then hit the market?
As a trader, we earn more money than average people. Our daily MTM is normal people’s salary. We cannot be a sloth while using leverage. We can not afford to put our money to limit order exposing yourself to a gap case.
What if it opens 10% down because of some scam? And kept going down?
We need to continuously monitor; if necessary we need to check and analyze lower time frames to see for other satisfying price action pattern. We may need to check relevance with the news too. The lower the risk; the better.