Trading Systems  |  MAR 2011

Three-Bar Inside Bar Pattern by Johnan Prathap

This trading strategy uses an inside bar as a three-bar pattern for long and short positions. Find out how it performed on gold, silver, and crude oil contracts. Whether you look at an intraday, daily, weekly, or monthly chart you will, without a doubt, see many inside bars. They appear in uptrends, downtrends, and sideways markets. Typically, most traders think of an inside bar as a two-bar pattern, but I have found successful trades using an inside bar pattern as a three-bar pattern for both long and short signals. An inside bar accompanied by higher closes indicates a short-term uptrend, and an inside bar accompanied by lower closes indicates a short-term downtrend. I tested this setup on daily data from May 2001 to August 2010 on three major commodities: gold (GC), silver (SI), and crude oil (CL). The results are worth some consideration.

by Johnan Prathap