This Simple Trading Strategy has to do with a trending stock in either direction up or down. You are looking for a pause or a pull back of some kind and then within that pause/pullback you are looking for a Inside Bar. This technique is super simple with easily defined risk and reward.
Look for a stock in a trend up or down – (If your not sure how to find if a stock is trending – go here ).
Look for a pause in the stocks momentum – then look for a Inside Bar. A bar that trades within the previous days bar.
Entry
For a stock in an up trend you will enter long above the Inside Bars high
For a stock in a down trend you will enter short below the Inside Bars Low.
Stop
For stock in an up trend if you enter and the price moves below the low of the inside bar you exit – thats where your stop loss will be – just below the inside bar low
For a stock in a down trend if you enter and the price moves above the high of the inside bar – you exit. Your stop will go just above the high of the inside bar.
Target
Many options here all depending on what type of trader you are – but I have provided some options below
1. Target the high to low of the inside bar – ex if the range of the inside bar is 2 points then your target is two points
2. If price has pulled back to some resistance your target can be the previous high or low of the move
3. Target can be 1 ATR or 2 ATR
4. You can trail your stop up below the low (if Long) of each bar after it closes