The 3 Bar Play: Raising the Bar on Your Day Trading Strategies + Video

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The 3 Relegate Free rein is the born progression to the strategies we've discussed latterly regarding the commercialize open. It's a great addition to the 1 Minute ORB and the other Inaugural Range Prison-breaking strategies we discuss in the blog. Not only that, only it's a favorite scheme used past many day traders like Jared Wesley from LiveTraders, Oliver Velez from iFundTraders, Beaver State Sami Abusaad from T3Live.

Today we'll cover the rules and criteria for spotting this pattern, along with the context you need for a successful trade. It can be a compelling strategy for managing en&germent during the excitability of the market open, and can leading to really nice gains.

But ahead diving in, beryllium sure to stop out this immediate instructor we've jointly on how to praxis this great scheme:

Rules for the 3 Bar Play

First off, you may be wondering why we've shown a some examples to a higher place with 4 bars instead of only 3. Technically, the pattern can have either. Sometimes it might have 5 bars as long as they are all in tactfulness and structural.

Yes, you'd call it a 4 Bar Play if it has 4 bars. But to all intents and purposes, this strategy is known American Samoa the 3 Measure Play or 3-block off strategy.

The thing to keep in mind with this strategy is that the pullback bar(s), whether 1 or 2 of them, motivation to be few and they need to atomic number 4 tight.

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Thereto goal, let's look at the three main rules for identifying a 3 bar play.

The first bar needs to be an "igniting" bar — a very wide range candle, ideally happening high book.
The pullback exclude, surgery bar 2 (&adenosine monophosphate; 3), mustiness not exceed 50% retracement of the 1st bar and accept relatively same highs.
The trigger bar (or expansion candle) should also be a nice marubozu candle to fresh highs Oregon lows.

Entry is taken on the break of the smaller "inside candles" with a stop below them.

Here's what this mightiness looking at same for both daylong and discourteous entries:

Notice that this provides traders with a definable take a chanc about halfway into the first igniting measure, or "Elephant ginmill" as Velez calls them. As a continuation spiel, you want to play in the primary direction of the break Beaver State trend from the premarket.

Let's look at handful of examples to build context for this strategy.

3 Bar Play Long Examples

Like we discussed above, the C. H. Best scenario for these setups is arsenic a continuation shape. That is, if the stock is gapping up, ideally you want a continuation above resistance from either a daily Beaver State premarket level. A combination of both scenarios would be even better!

To that end, let's look at this PBTS example.

PBTS 2 minute chart 3 Bar Play — PBTS 2 minute graph 3 Bar Period of play

On this morning, the stock was gapping substantially in the premarket with a nice consolidation into the open. On the open, the stock ramps up on the first 2 infinitesimal candle. It consolidates for one bar, then continues in the steering of the gap.

The second candela of the traffic pattern was a tidy pullback connected lower volume. Ideally, you set your entry impartial in a higher place this candle and the 1st candle. The breakout provided a nice gain of 16% from our entry in about 15 minutes.

Long Illustration #2: TSLA

In that example, we are using the 1-minute chart to find our 3 Bar Play. Before we do, it is important to note that Tesla exploded out of a consolidation happening the unit of time chart, which provided us the impetus to get long on this 3 bar encounter.

Notice the daily graph initial with the resistance line drawn:

Zooming in now on the premarket and opening buzzer, we go through that this line was a key level in the premarket as recovered. The importance Here is that if this stemma is tame, we have zipp but "K pastures" above us.

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Just as we have in our other examples, we get an igniting bar moving up and through and through resistance, a slight break, and and so a continuation.

Dungeon in mind, that the "pause" candle can be red or green, it doesn't really matter. The important thing is that it doesn't retrace too some of the first cd and forms near the top of that candle.

In this example with TSLA, we had a nice chance for a nearly $10 gain in a short amount of time. Great odds!

3 Bar Bet Short Example

The great matter about the 3 Bar Toy with strategy is that it privy be played in either focal point. Fair every bit you might look for stocks that are gapping up and/operating theater breaking extinct along a day-to-day time redact, the one can be practical for stocks breaking down.

To that end, let's take a look at this example of OCGN.

Comment that the daily chart here has a glorious gap fine-tune through prior support. This sets the tone for us in the premarket.

OCGN daily chart gap down — OCGN day by day chart gap downhearted

The great matter about this strategy is that it's simple to scan for gaps in the morning. All we have to do is dissect the large time frames for a nice continuation locomote once the market opens.

On that token, let's look at the premarket and give for this particular day with OCGN:

OCGN 2 minute 3 Bar Play — OCGN 2 narrow 3 Browning automatic rifle Play

Happening this 2 minute graph, OCGN broke through and through premarket support at $7.50 very easy. We got a quick pause, then resumed with a beautiful trigger candle. This led to a quick $1.25 gain. Not bad for 15 minutes worth of process.

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How to Oversee a 3 Bar Play Position

At this point, you may cost wondering how to manage a emplacement when trading this strategy. There are few things to consider for this.

If you are a beginner who is unmoving exploring and educating himself on loudness and price carry through, you may want to set back hard and fast targets and stops.

We discuss this in other posts, but here are a handful of approaches you tin take.

Take Profit at Specific R-values

R-values are basically your risk/reward computing. Lease's use the OCGN example above and say you entered forgetful at $7.22. Using the $7.44 area as your stop noted on the chart, this means you'd be risking $0.22 for the trade.

To calculate your reward, you may think that a 2R or a 3R or a 4R is fit. If that is the case, you simple doubling, triple, OR quartet your risk of infection.

For this example, a 3R trade would be 3 x $0.22 = $0.66. That means, from your entree, you'Ra looking to take profits at $7.22 – $0.66 = $6.56.

Therefore you would take set an order to subscribe to profits and cover at $6.56, which would have been towards the bottom of the second bodied red candela on the chart after your entranceway. Here's what that would look like:

In other words, your trade was 1 risk unit to 3 reward units. And if this suits your personality, past stick to it. Granted, IT's a bit of an "all or nothing" type of scheme and you whitethorn stop out if your target isn't hit and the stock reverses. But that's the name of the lame.

Over time, you may want to adjust your net income-pickings rules to include trailing stops.

Now, you may live rational, "But, look how much meat we left on that trade!"

Rent out's hire a look at how a high clock redact may experience helped you put on more profit on this trade.

High Time-frame Reinforcement and Resistance

Returning to the time unit graph of OCGN we can clearly see that it is "filling the gap" happening the daily and running into potential support at this $6 charge. As traders, we can use these levels to fit potency targets.

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OCGN daily support — OCGN daily patronise

Often times a stock is accustomed find support at daily levels. This $6 level, which is also a "whole dollar" psychological even, did just that for OCGN. It coincided with the last candle high earlier the gap, as annotated on the chart.

Enlightened this, the astute bargainer could have set this as a fair game no matter of the R-time value. Or, atomic number 2 or she could have taken a partial at the 3R stratum at $6.56, and and so taken the rest at this key level. It proved to be the worst for OCGN on this day in front reversing.

Even more advanced traders could induce added to their position on the first tieback arsenic the stock continuing depress.

Either way, it's usually optimal to keep off things reniform and pay yourself along the way.

Other Methods of Trade Direction

Fibonacci lines and Pivot Points can be another great set of tools to identify areas to sell Beaver State cover. We overlay those strategies in depth in the links provided.

To celebrate things simple, though, there is an old bywor you should remember, "sell into strength." The point here is to key out stocks that are "oversold" or "overextended" and sell or cover into those moves.

OCGN's selloff was fast and furious off the open that morning. This tolerant of selling pressure isn't sustainable for any median threadbare.

Recognizing this, most traders will sell or cover into the immoderate strength or weakness, learned that a rally could be just around the recession.

One way you might envision an overextension is to judge how extended a stock is from its 10 Oregon 20 hurtling averages. As shown in the graph to a higher place. OCGN was considerably extended from the blue 10ma on the chart. This is a saintlike sign that the stock leave inverse at some point.

There are a myriad of shipway to manage trades, and all of them deliver their pros and cons. It's very equal to you to practice what works Best for you in order to place profit targets and take the emotions out of trading.

Practicing the 3 Ginmill Play

That brings us to our last full stop. No scheme is going to be perfect, but unless you know your probability for success direct artificial trades, you're literally gambling.

Untold amounts of emphasis and failure in the markets can be attributed to trading without an edge in. For that reason, we propose you do a quick search in the simulator for stocks that are gapping up or down in the premarket with some volume. Then, take that list of stocks and identify the best candidates for a 3 Bar Play.

Here is an illustration of what that scan filter might look up to like for gap ups:

In this filter illustration, we've chosen stocks above $5 with a premarket gap minimum of 2% and at least 100k shares traded.

The rest is up to you. As we mentioned at the beginning of the article, there are a lot of great educators who teach this strategy through unfilmed trading and great telecasting resources. Sami Abusaad, Jared Charles Wesley, and Oliver Velez are good a few.

Be certainly to check their YouTube pages and give them a like.

Here's to good fills!