Most gold trading strategies rely on what the price of gold is doing. However, with inside bar trading, it’s actually more beneficial to focus on what the price is not doing. Using inside bars as a trade strategy is nothing new, but there are many different ways to look at them. Once you learn enough about inside bars, you’ll be able to quickly see how beneficial they are to your trading strategy. Here are some of the characteristics you need to know regarding inside bar trading.
What is an Inside Bar?
Inside bars are popular chart formations, and they aren’t very difficult to identify on a gold chart. You’ll notice an inside bar since its own price action is covered by the price action from the previous day. Some inside bars are easier to detect than others, but this is generally the pattern it follows.
Trading Inside Bars
Just like other gold forex trading strategies, the use of inside bars indicates a potential trend reversal. When the gold price has trended upward for a certain amount of time, a pause in the movement generally indicates a reversal in the other direction. The pause in the price action represents the inside bar. When gold traders see the inside bar, they can decide whether it’s time to make a trade.
Trade Breakouts
Inside bars can also be used in trade breakouts. In the gold trading world, you have to make several short-term trades as well as long-term trades. Traders generally sell at a price just below the low price of the inside bar, and they will buy at a price just higher than the high price. The point behind this strategy is investors want to see an increase in volatility. When this happens, they expect the price to either increase to a new high or decrease to a new low. Trade breakouts can be lucrative, but you have to follow your trading strategies and manage your risk as normal.
It’s always important to note anyone trading their gold investment will likely lose more money on their trades than they win. However, with the proper strategies, you can capitalize on the high highs and give yourself a better chance of turning a profit.
