Trading Price Action Trends

Chapter 8

The Importance of the Close of the Bar

A5 minute bar usually assumes something similar to its final appearance seconds to a minute or more before the bar closes. If you enter before the bar closes, you might occasionally make a tick or so more on your trade. However, once or twice every day, the signal that you thought was going to happen does not and you will lose about eight ticks. That means that you need about eight early entries to work as planned for every one that does not, and that simply won't happen. You can enter early with trend in a strong trend and you will likely be fine. However, when there is a strong trend, you have so much confidence in the signal that there is no downside to waiting for the bar to close and then entering on a stop beyond the bar. You cannot be deciding on every bar if an early entry is appropriate, because you have too many other important decisions to make. If you add that to you list of things to think about, you will likely end up missing many good trades every day and forgo far more in missed opportunities than you could gain on an occasional successful early entry.

This holds true for all time frames. For example, look at a daily chart and you will see many bars that opened near the low but closed in the middle. Each one of those bars was a strong bull trend bar with a last price on the high at some point during the day. If you bought under the assumption that the bar was going to close on its high and bought near the high and ...