The Inside Bar
When it comes to learning technical analysis, a lot of investors will consider the "big picture" patterns and make short-term trades based on such indicators or patterns. The problem, however, is that bigger picture readings are often long-term in nature. So, let's take a look at a short-term pattern.
One of short-term patterns that investors seek is a two-bar pattern known as the inside bar. This pattern reflects a short-term change in investor sentiment, so that if a pattern has been driven downward, the possibility is that the short-term prices will turn around and head the other way.
Identifying an Inside Bar
Investors who are just learning technical analysis might have a tough time identifying the inside bar. Explained (our website has a diagram), the inside bar pattern consists of a taller bar (wide trading range) followed by a shorter bar (tighter trading range). The shorter bar will fall within the same range as the preceding bar.
Find Supporting Data
When it comes to using the inside bar to commit to a trade, investors should seek additional confirmation through additional analysis. This step is often overlooked when investors start learning technical analysis. Other analysis includes fundamental data for the security, sector and market, as well as technical data such as support and resistance levels and momentum.
In terms of the inside bar itself, investors will find greater reliability when they discover the bar that follows a sharper inbound trend. As well, the wider the first bar and shorter the following bar, the better as this indicates the stronger momentum has ended, and the possibility for a more dramatic turn.
Finally, volumes should be smaller on the inside bar than on the first bar.
When it comes to learning technical analysis, investors should remember that there are many other indicators that need to confirm their trade decisions. As well, there are plenty of specialized software programs available to make simple buy and sell recommendations. - 23221
One of short-term patterns that investors seek is a two-bar pattern known as the inside bar. This pattern reflects a short-term change in investor sentiment, so that if a pattern has been driven downward, the possibility is that the short-term prices will turn around and head the other way.
Identifying an Inside Bar
Investors who are just learning technical analysis might have a tough time identifying the inside bar. Explained (our website has a diagram), the inside bar pattern consists of a taller bar (wide trading range) followed by a shorter bar (tighter trading range). The shorter bar will fall within the same range as the preceding bar.
Find Supporting Data
When it comes to using the inside bar to commit to a trade, investors should seek additional confirmation through additional analysis. This step is often overlooked when investors start learning technical analysis. Other analysis includes fundamental data for the security, sector and market, as well as technical data such as support and resistance levels and momentum.
In terms of the inside bar itself, investors will find greater reliability when they discover the bar that follows a sharper inbound trend. As well, the wider the first bar and shorter the following bar, the better as this indicates the stronger momentum has ended, and the possibility for a more dramatic turn.
Finally, volumes should be smaller on the inside bar than on the first bar.
When it comes to learning technical analysis, investors should remember that there are many other indicators that need to confirm their trade decisions. As well, there are plenty of specialized software programs available to make simple buy and sell recommendations. - 23221
About the Author:
Chris Blanchet has more than 16 years of experience as a Financial Advisor at one of the world's largest banks by market capitalization. To learn technical analysis free visit Online Trader Today.com where Chris writes about Technical Analysis and Options trading. Chris also maintains a debt-free blog at How To Repay Debt.com
posted by X - Men @ 12:24 AM
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