PTL Inside Bar Trading Strategy For MT4

PTL Inside Bar Trading Strategy For MT4

The PTL Inside Bar Trading Strategy For MT4 is a trading method that uses a combination of two technical tools: the inside bar and the Perfect Trend Line (PTL) indicator. And among the various functions that the conflux of the two tools can do, the capacity to confirm each other is what is emphasized in this system.

What the inside bar pattern indicates is either substantiated or contradicted by the PTL and vice versa, which helps filter out false signals. Nevertheless, it is important for the trader to learn about the other applications of the melding of the inside bar and PTL to allow for greater flexibility in using this system. And that is one of the things discussed in this article, in addition to the main trading setup rules for the PTL Inside Bar Trading strategy.

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Inside Bar

Before getting down into the brass tacks of things, it is first necessary to be familiar with the system's components. The first technical tool to take in is the inside bar.

To find the inside bar on the chart, the trader needs to look for a pattern made of two candles. These two candles are composed of a big candle that completely envelops the second one's range within its own; it is comparable to a reverse engulfing pattern.



When this pattern appears, it connotes two things: a possible reversal or a potential breakout. Typically, inside bars are much more preferred for timing breakout plays as it signifies a period of consolidation for the price following a strong move. But in this system, it is leaning more towards reversals because of the PTL indicator.


PTL

As its name suggests, the Perfect Trend Line is a trend-following indicator. It plots two continuously moving broken lines on the chart that lie parallel to the price. The PTL follows a calculation of the highest high and lowest low of two different periods. Its function is very similar to the Parabolic SAR or the moving average crossover.

It also has the capacity to catch trends, and it can detect an impending shift in price direction, which makes it a perfect complement to the inside bar as it supports a reversal that the price pattern might indicate.

It aids the inside bar with its green and red dots that appear intermittently on the chart, marking potential trade entries for this system.


PTL Inside Bar Trading Strategy For MT4 in focus

So, this strategy's primary purpose is to find trading opportunities where both technical tools are in agreement. For this, the trader needs the Inside Bar detector and the PTL indicator installed on the MT4.

The proper sequence of spotting a valid trade setup starts with the Inside Bar detector recognizing its pattern. Then the entry is signaled by the dot that the PTL indicator forms. If there is no presence of the PTL dot near the inside bar, no trades shall be taken. The same no-trade rule applies if there is a PTL dot but no inside bar before it.

Moreover, the PTL dot must not come before the inside bar as the inside bar is the primary signal of this system. Essentially, this is how the two indicators confirm each other for a valid trade setup.


PTL Inside Bar Trading Strategy For MT4 - BUY Setup

To illustrate the relationship between the two tools in a long position, here is an example:



The long red candle on the very left of the chart's highlighted area is what is referred to as the "mother bar" of the pattern, i.e., the first candle of the pattern. However, this candle is larger than the next candle, but the Inside Bar detector identified five other candles that were significantly shorter than the mother bar.

After this, the PTL indicator presented an entry with a green dot (a green dot registers a long trade). In this case, a pending order is set at two pips above the red line of the inside bar pattern.

The stop-loss is then placed at the recent swing low while the minimum target is the same number of pips risked for this trade. Everything turned out well for this trade as it was able to capture 64 pips from an initial risk of 10.


PTL Inside Bar Trading Strategy For MT4 - SELL Setup

Now, short positions work the opposite way:



In this example, the Pin Bar's presence on the very left of the chart's highlighted area suggests that the prior uptrend could be losing steam. However, a trade was not taken until the PTL red dot that appeared a few hours later. When the red dot appeared, a pending order was placed at two pips below the inside bar pattern's green line.

The stop-loss was placed at the most recent swing high, which was at the high of the green shooting star-like candle before the PTL red dot. And the same 1:1 risk to reward ratio of the buy setup was applied. When the trade concluded, it acquired a profit of more than two-fold of its initial risk (51 pips of profit from a 22-pip risk).

It is also worth noting that other inside bar patterns are detected by the indicator. But since a PTL dot did not accompany them, no trade was taken.


Trend Trading - PTL Inside Bar Trading Strategy For MT4

Apart from the trade setups discussed above, the combination of both tools can also be used for trading trends. As stated earlier, the inside bar is best for finding an entry in trends after a period of consolidation.

Instead of using the PTL dots, the trader makes use of the alignment of the two lines that make up the PTL indicator. Whenever the broken green line is above the broken red line and both broken lines are above the price, the predominant trend is bullish. The opposite applies to a downtrend. Therefore, the inside bar pattern would be the entry to the prevailing uptrend or downtrend.

 

Here is an example:



The PTL reads an overall bullish trend in the above example since the broken green line was above the broken red line, and both lines lie below the price. Then, the inside bar with the checkmark on top offered an entry into this uptrend while the other two did not because it no longer fits the PTL line alignment criteria.

Breakout trading - PTL Inside Bar Trading Strategy For MT4

Finally, as the inside bar connotes consolidation, the apparent compression of price after the pattern forms puts forward an entry for a breakout play.



There were three inside bars before the actual trade took place on the chart's highlighted area. What qualifies as a breakout, in this case, is a clear close below the red line of the inside bar indicator plus a PTL red dot. The trend was not a huge factor here as the market was range-bound before the trade signal. Three other inside bars also appeared after, but a PTL red dot did not guide them so no trade was triggered.

 

Please note that you should always use a demo account when you learn a new trading strategy. This will help you to avoid financial losses during the learning curve which comes with every new trading system. On a real money account we suggest a conservative money/risk management where you should not risk more than 1% of your trading capital for each trade.

 

Download the complete system description and the files here:

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Download the FREE PTL Inside Bar Trading Strategy for MT4.

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