Monday, July 25, 2011

Trading barb wire

While its normally excellent practice to avoid barb wire, experienced traders can and do trade it profitably. On the occasions I do enter on barb wire, its often because I have missed an earlier entry in a trend and the barbwire is another opportunity for me to enter with the trend. I usually avoid barb wire mid-range.

For example, today's BW between b24-28 had a trend breakout to the ema and it bounced off and gave an fBO entry that is also a fL2 entry (b27L1, b29L2) for anyone who missed buying above b22. This sort of BP usually produces very short BW lasting 4 to 6 bars. A similar BP occurred at b66. AStrong breakout at b62 was followed by two feeble attempts to reverse the breakout (b63 is a feeble attempt to create a reversal bar).

b73 was a similar is a barbwire A2 in a trend that should be read as a fH2 and therefore two failed attempts to reverse the trend. (If you expect the bar to trigger, its quite ok to short the close on limit as was done here)

The last but somewhat rare scenario is that BW can be shorted when it repeatedly fails to run stops as in b45-60. How many attempts equate to repeated? That's yet unknown, but two failed attempts to break out up after at least one successful attempt to break down should suffice.

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