Trading an Inside day, week or month.

January 2, 2023 0 By The Balanced Trader

Trading an Inside day, week or month.

There are many nuances to trading an inside candle or daily profile structure and often yield a good risk reward trading setup. The most important thing to observe are the extremes of such structures. Once a breakout occurs I tend to be very conscious to pace, volume to gauge participation. A breakout will more likely sustain when we have HTF participation.

When in balance you would expect POC, VWAPs, MIDs to be easily traversed and VA extremes to see responsive behaviour. Often we can identify potential initiative moves by observing PA at these key levels. I am not a fan of trading INSIDE OUT when in balance but obvious failures or fast rejections of these key areas can be telling.

There is a high potential for fake outs, but a breakout followed by a PB (hold against a prior key area of interest) is a safer way to initiate this trade idea.

Also watch out for false breakouts. A false break out tends to happen when consolidating markets initiate away from balance that draws in other smaller time frame traders and stops. This gives opportunity to opposite HTF traders to use this liquidity to execute larger orders forcing the late entrants to exit and creating an accelerated reversal move (on higher volume). These moves have a high probability to test the other extremity of balance.

Finally the best moves away from balance are where we have multiple days of tight overlapping balance where buyers and sellers have accepted value. A move away from longstanding consensus (often happens wen the market is awaiting new info into major news events or year end). We just so happen to have been consolidating for the last few weeks into YE 2022.

Questions I often ask;

Are higher prices drawing in HTF participation and therefore is the imbalance move from balance likely to sustain.

Where are areas that buy or sell side imbalances likely to find support resistance and how are those areas interreacted with. What is the pace of the auction?

Are we leaving behind singles and LVN?

Are PB aggressively contested and quickly revert or is the move consolidating or even struggling?

All moves start from balance start in balance and end in excess, although sometimes that excess can manifest as exhaustion. How can we identify these characteristics so that we can better reduce risk and lock in profits.

Breakout of 8 Day Balance following June 2022 ECB meeting
Look at the PA as we move away from the lows following the ECB meeting.