3 Bar Price Break Buy/Sell Forex Strategy

This trading strategy modifies the standard inside bar break-out trading system by adding a trend perspective that allows a follow-through confirmation.

It is a 3-bar price pattern that adds a third bar to the inside bar price set-up.

Chart Setup

MetaTrader4 Indicators: StochasticStack.ex4 (default setting), insidebar.ex4 (default setting)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

Download

Download the 3 Bar Price Break Buy/Sell Forex Strategy

Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy order if the following indicator or chart pattern gets displayed:

  1. The inside bar custom indicator is put in use to help us spot the 2-bar price pattern (inside bar) more efficiently (represented by the gold bars seen on the chart). Once that is done, we’ll tend to filter out the inside bar formation to get one where the first bar closes higher than the preceding bar, with the next bar being an inside bar, while the third bar that comes after the inside bar to complete the 3-bar price pattern closes higher. If this is the case, a buy is advised on the close of the third bar.
  2. If the lines of the StochasticStack.ex4 custom indicator breaks below the 20.0 (oversold region) level as shown on Fig. 1.0, it is an indication of upward price pressures i.e. a buy alert.

Stop Loss for Buy Entry: Place stop loss 2 pips below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following holds sway:

  1. If the lines of the StochasticStack.ex4 custom indicator breaks into the overbought region (above the 80.0 level) as seen on Fig. 1.0, there’s a looming bearish sentiment that is hanging over the market, hence an exit or take profit is strongly advised.

Sell Entry Rules

Enter a sell order if the following rules or conditions take precedence:

  1. The inside bar custom indicator is applied to the chart to aid us spot the 2-bar price pattern (inside bar) more efficiently (denoted by the gold bars seen on the chart). Once that is done, we’ll tend to filter out the inside bar (gold bars) formation to get one where the first bar closes lower than the preceding bar, with the next bar being an inside bar, while the third bar that comes after the inside bar to finish off the 3-bar price pattern closes lower. If this is true, a sell is advised on the close of the third bar.
  2. If the lines of the StochasticStack.ex4 custom indicator surges above the 80.0 (overbought region) level as shown on Fig. 1.1, it is an indication of possible downward price pressures i.e. a sell alert.

Stop Loss for Sell Entry: Place stop loss 2 pips above immediate resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following holds true:

  1. If the lines of the StochasticStack.ex4 custom indicator breaks into the oversold region (below the 20.0 level) as seen on Fig. 1.1, a bullish trend is said to be building, hence an exit or take profit is strongly recommended.

Sell Trade Example

Fig. 1.1

Free Download

Download the 3 Bar Price Break Buy/Sell Forex Strategy

About The Trading Indicators

The insidebar.ex4 custom indicator is a technical indicator that pinpoints pin bar candlesticks, thereby taking the stress of scanning through the activity to spot for these candlestick patterns.

The StochasticStack.ex4 custom indicator is an enhanced stochastic indicator, with somewhat the fundamental idea.

When the lines are aligned above the 80 level, price is said to be in an overbought conditions, while below the 20 level denotes oversold sentiment.

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