Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts, + Website

CHAPTER 4

Dough Bar to Die Bar

The concept of the Dough Bar is very simple. Many writers have observed this basic phenomenon: Trends often begin and end with a wide-ranging bar. This bar usually stands out very clearly as the widest range bar among its peers, and as a candlestick pattern, it often forms with very small wicks, or none at all. Coming at the beginning of the day, as with a breakout from the Opening Range Bar (ORB), it can be especially significant.

Coming at the end of the trend, it should be understood that the ending Die Bar is the same trend color as was its initial Dough Bar. That serves an important purpose when trying to time a position exit. In intraday trading, it is usually far more profitable to exit as price is still thrusting in the direction of the trend than waiting out a trailing stop-loss order as the only exit strategy. Since a two- to three-point target is a reasonable expectation when trading something like the mini-Russell, a trailing stop order might give away half or more of that profit in a typical pullback to a trailing stop-loss placement.

The appearance of the Die Bar often comes at the end of one of these intraday swings and offers a greater potential exit opportunity before the market turns back in correction. In other words, a trader should be encouraged in his position when a trend begins itself with the appearance of a Dough Bar, but discouraged about the trend's continued progress when another wide-ranging bar appears after several ...