If you are already a Price Action Trader, you are no stranger to Trend Bar candles. It shows a very clear dominance of the bulls or the bears. So there are many effective ways to trade with this special candlestick. In this article, you will learn more about a very unique trading strategy, which is the Trend Bar Failure, bringing a stable monthly profit.
What is Trend Bar?
Trend Bar is a candle that contains a small trend in a smaller time frame. It opens and closes at both ends of the whole candle.
A bullish Trend Bar opens near the low and closes near the high. A bearish Trend Bar opens near the high and closes near the low.
Trend Bar story shows that traders are “committed” to going in a certain direction. In a matched transaction, the number of buyers and sellers is completely equal. For the price to increase, the buyer’s psychology must be stronger, wanting to buy more than the seller. The opposite is also true.
Trend Bar must have a real body greater than 50% of the full length of the candle.
The idea of the Trend Bar Failure strategy
In an uptrend, bearish Trend Bar candlesticks represent contrarian traders attempting to reverse the trend. So when these traders fail to reverse the trend (which usually fails because the trend is always more likely to continue than to reverse), the trend will continue. Thus, the bearish Trend Bars in an uptrend will have a high probability of failure. We will take advantage of these failed Trend Bars to enter trades when the trend continues.
Contrarian traders support our strategy. Because when they realize they were wrong, they would exit and enter new bullish orders, plus other bullish ones from current trending traders, which will make the price go up.
How to trade the Trend Bar Failure strategy
We will enter an order when a reversal Trend Bar fails, that is when the main trend is continued.
If a Trend Bar does not appear after a previous Trend Bar, we will prepare for the appearance of a Trend Bar Failure.
Rules for entering a bullish order:
1. The EMA 20 is pointing up or the current trend is bullish
2. Bearish Trend Bar appears
3. The bottom of this bearish Trend Bar has been breached but the price does not form the next bearish Trend Bar
4. Place a bullish order above the top of the current candle
5. Cancel the order if it is not triggered in the next candle
Rules for entering a bearish order:
1. The EMA 20 is pointing down or the current trend is bearish
2. Bullish Trend Bar appears
3. The top of this bullish Trend Bar is broken but the price doesn’t form the next bullish Trend Bar
4. Place a bearish order below the bottom of the current candle
5. Cancel the order if it is not triggered in the next candle
The 1st example
EUR/USD currency pair
1. A strong bearish Trend Bar appeared and following it was a small candle breaking the bottom of the Trend Bar. But it is not a bearish Trend Bar. This is a nice setup of the Trend Bar Failure strategy.
2. The bearish Trend Bar moved near the EMA and could not go deeper. The bottom of the Trend Bar was not broken by the candle after it. And this candle was a bullish Trend Bar so it does not satisfy the trading rules. We shouldn’t open an order when encountering this situation.
3. A bearish Trend Bar appeared and the next candle, which is not a trend bar, broke its bottom. A bullish order could be placed at the top of this candle. The order was activated immediately on the next candle and gave a very good profit
Remember, we will CANCEL if the order is not triggered IMMEDIATELY at the next candle.
Because the most beautiful trades usually give immediate results. The longer you wait, the less effective the trading setup will be. We will cancel orders to eliminate the risk of bad orders. Only use your money for good ones.
Next examples
GBP/USD currency pair in the daily candlestick chart.
1. This was a beautiful setup when this candle broke the bottom of the previous bearish Trend Bar. You should place a bullish pending order, waiting for a trigger when the price crosses its highest high. The next candle triggered the order and brought fine profits.
2. It was another nice setup when a candle broke the bottom of a bearish Tend Bar. However, you should cancel the order because the next candle could not surpass the highest high of the previous one.
AUD/USD currency pair in the weekly candlestick chart.
1. The trend bar was bearish and the next candle broke the top of the trend bar. The bearish order was activated.
2. This bullish setup was not activated because the price couldn’t break through the top of the Trend Bar.
3. The next candle broke the top of the bullish trend bar. The order was activated and profitable
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