DBLHC, DBHLC, IB. Turn on the inside bar

Hello, dear colleagues. Today we will continue to study simple price patterns of the Price Action trading method. In spite of the formidable abbreviations in the title of the lesson, as you will further understand, there is nothing complicated about the reversal formations I will present today. In fact, the patterns are DBLHC и DBHLC - These are bullish and bearish variations of the same reversal "set-up". But first things first...

I would also like to remind those who are just beginning to learn Price Action trading methodsThe fact that I talk everywhere about bars rather than candlesticks, as many people are used to, is my personal preference and does not affect the quality of individual patterns and the method as a whole. Now we can move on.
DBLHC (Double Bar Lows Higher Close), or a double bar with the same base and a higher close is a bullish variant of the pattern, and a bearish variant DBHLC (Double Bar Highs Lower Close), translated as double bar with equal highs and lower closes. Again, the name is a very approximate representation of the pattern, since it can actually consist of 2 bars, like in the classic description, or 3 bars, or even 4 bars. Many people rightly believe that the more bars a pattern contains, the stronger it is.
Let's look at each of the patterns individually.

DBHLC

DBHLC - The pattern consists of two bars, which must have the same minima (see Figure 1). A difference of 3 points is allowed. The right bar completely absorbs the left bar, and the closing of the right bar must be over the maximum previous.

Figure 1 shows an example of this pattern, which is quite often seen on price charts. However, we must be especially careful when identifying it and take into account all of its features, if only because only a "beautiful" pattern in the right place will bring us profit, while an incorrect detection of a reversal will lead to loss.

DBLHC

DBLHC - The pattern also consists of two bars, which must have the same highs (see Figure 2). A discrepancy of 3 points is allowed. The right bar completely absorbs the left bar, and the closing of the right bar must be below the minimum previous.

I want to focus your attention once again on those parts of the price chart, where all of the patterns of the Price Action trading method without exception work with a high probability (I talked about this in previous articles). These are Price Pivot Zone (PPZ), Merges, Swing Low for bullish patterns and Swing High for bearish patterns.

IB and reversal on the inside bar

Internal is called a bar whose range does not go beyond the range of the previous bar (see Figure 3). Among traders, the abbreviation IB is often used. This is an abbreviation of the English - Inside Bar.

The bar that precedes the inner bar is called "defining" or "measuring". To make a decision to trade on this pattern, both bars, "measuring" and "internal", are considered as a whole, i.e. the pattern itself consists of 2 bars. The pattern is two-sided and may well serve as a reversal pattern.

A hook reversal on the inside bar (HR)

Consider the conditions that satisfy the pattern.
For the up-trend (see Fig. 4):
- The opening price of the inside bar should be near the maximum bar.
- The closing price of the inside bar should be near the bar minimum.
- The bar must be completely within the range of the previous (measuring) bar.

For the down-trend (see Fig. 5):
- The opening price of the inside bar should be near the minimum of the bar;
- The closing price of the inside bar should be near the bar's maximum;
- The bar must be completely within the range of the previous (measuring) bar.

Entry into the transaction is made by a stop order placed on the breakdown of the maximum (minimum) of the measuring bar with a Stop-Loss order on its opposite side, plus a filter of 5 points, not forgetting the spread.

And never forget that the strongest signals occur after a strong trend. If the trend is sluggish, so is the signal, and in a flat, we just ignore all the signals, not trying to look for a pattern where there is none.

Good luck with learning and trading.