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Practical Strategy: Trading Inside Bar with OCO Orders

The Inside Bar pattern is a widely used candlestick pattern in trading due to its simplicity and profit potential. This strategy is especially useful for day traders and scalpers. In this article, we will discuss how to use the Inside Bar pattern with the OCO (One Cancels Other) Order technique to maximize your trading opportunities.

1. What is an Inside Bar Pattern?

An Inside Bar pattern is a candlestick formation indicating a consolidation phase in the market. It occurs when the body and wicks of the inside bar are completely within the range of the previous bar, known as the Mother Bar.

Characteristics of an Inside Bar:

  • Inside Bar: A candlestick with a body and wicks entirely within the range of the Mother Bar.
  • Mother Bar: A larger candlestick that sets the range for the Inside Bar.
  • Inside Bar Pattern: Can be considered a potential breakout signal.

Description:

  • Uptrend: An Inside Bar pattern formed after an upward move indicates consolidation before a potential breakout.

2. Inside Bar Trading Strategy with OCO Orders

A. What is an OCO Order? An OCO (One Cancels Other) Order allows you to place two orders that cancel each other out. If one order is executed, the other is automatically canceled.

Features of OCO Order:

  • Buy Stop Order: If the price breaks above the highest level of the Mother Bar.
  • Sell Stop Order: If the price breaks below the lowest level of the Mother Bar.
  • Mutual Cancellation: If the Buy Stop order is executed, the Sell Stop order is canceled and vice versa.

B. Steps to Trade with OCO Orders

Step 1: Identify the Inside Bar Pattern

  1. Find the Inside Bar Pattern: Look for the Inside Bar pattern on the chart to identify the consolidation phase.

Example of Inside Bar Pattern:

  1. Determine Buy Stop and Sell Stop Levels:
    • Buy Stop: Place a few pips above the high of the Mother Bar.
    • Sell Stop: Place a few pips below the low of the Mother Bar.

Example Order Placement:

Order

Level

Description

Buy Stop

1.1673

A few pips above the highest level of the Mother Bar.

Sell Stop

1.1548

A few pips below the lowest level of the Mother Bar.

Step 2: Set Stop Loss and Take Profit Levels

  1. Stop Loss:
    • Place the stop loss in the middle between the Buy Stop and Sell Stop.
    • For example, if the distance between the Buy Stop and Sell Stop is 125 pips, place the stop loss around 63 pips from the entry point.
  2. Take Profit:
    • Set the take profit level with a minimum Risk/Reward Ratio of 1:2.
    • If the stop loss distance is 63 pips, the take profit target can be set 126 pips from the entry point.

Example of Stop Loss and Take Profit Levels:

Order

Entry

Stop Loss

Take Profit

Buy Stop

1.1673

1.1600

1.1799 (1.1673 + 126 pips)

Sell Stop

1.1548

1.1621

1.1422 (1.1548 - 126 pips)

Step 3: Use OCO Order on MetaTrader Platform

How to Set OCO Orders:

  1. Order Entry:
    • Create two pending orders: Buy Stop and Sell Stop at the determined levels.
  2. OCO Script:
    • MetaTrader does not have a default OCO order feature for entry. You need to use an MQL script. Download the oco.mq4 script to create OCO orders in MetaTrader.

How to Use OCO Script:

  1. Download Script:
    • Download and install the OCO script from the provided link.
  2. Open Script in MetaTrader:
    • Navigator > Scripts > OCO Order.
  3. Enter Parameters:
    • Set the parameters for Buy Stop and Sell Stop at the determined levels.
  4. Execute Script:
    • Run the script to create the OCO order.

Screenshot of OCO Order Script:

Step

Detail

Download Script

Download from oco.mq4.

Install Script

Add to MetaTrader via Navigator.

Enter Parameters

Set levels for Buy Stop and Sell Stop.

Execute Script

Run the script to create OCO order.

3. Tips for Trading Inside Bar with OCO Orders

  1. Choose the Right Time Frame:
    • Inside Bars can be identified in various time frames. For scalping or day trading, choose lower time frames like H1 or H4.
  2. Confirm with Other Indicators:
    • Use additional indicators like Moving Average or RSI to ensure the main trend supports the Inside Bar pattern.
  3. Set Risk Management:
    • Determine stop loss and take profit according to your risk/reward ratio.
  4. Monitor Economic News:
    • Avoid trading during major news releases that can increase volatility and risk.
  5. Test the Strategy:
    • Before using this strategy on a live account, test it on a demo account to understand how OCO orders and Inside Bar patterns work.

Trading the Inside Bar with OCO Orders is an effective strategy for breakout trading with good risk management. By placing Buy Stop and Sell Stop using the OCO Order feature, you can automate your trades based on the breakout signals from the Inside Bar pattern.

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