The DIBS Method System— Your Trading Advantage

Hello, fellow traders.

In order to earn on Forex, you need to have trading advantages. That will give you the statistical odds in favor of profits and confidence in the long-term success. One of such benefits is the limited risk and unlimited profit.

Today we talk about classic Forex strategy — The DIBS Method system, the system that contains the above-mentioned advantage.

Characteristics of DIBS Method strategy

Platform: MetaTrader 4
Currency Pairs: EURUSD, GBPUSD, USDCHF, USDJPY
Timeframe: H1-D1
Trading Time: from 6:00 to 15:00 GMT
Recommended Broker: Roboforex, Instaforex, Hotforex

The concept of DIBS Method

The strategy is based on Price Action pattern “Inside Bar”. This pattern consists of maternal and internal candles and refers to the temporary agreement on price between buyers and sellers. The borders of the internal candles are entirely within the borders of its predecessor, “maternal” candle.

Our goal as Forex traders is to capture the movement, capture the trend a little before the other players. And be in the trend as long as possible.

Before we catch a trend, we need to figure out its direction in order not to trade against the trend.

So, at a certain time at 06:00 on the time of Greenwich (you can find the GMT time on Google), we define a price line that will serve as a point of reference, the point of the opening day. Above this line we will only buy and below we will only sell. It is the high time when the movements originate which will dominate during the day. Therefore, when the price is above this line, we can say that there are prerequisites to trend up and when it is below this line, there is a prerequisite to the trend down.

Starting at 6:00 GMT we monitor the market, the time chart, and wait for the appearance of “Inside bar” pattern. Once the inside bar is formed, we look, where is the price in relation to our “line of opening the day”, that started at 6:00 GMT.

If the price is lower, we will trade on the breakout of Inside bar down, if the price is above, we will trade on the breakdown of the Inside bar up.

Entry the market and Stop Loss

We trade the breakout of the borders of the Inside bar (smaller candles). If the price is above the price at 6:00 evening GMT, we buy, if it is below, we sell. (Using pending orders).

We set Stop loss at the opposite end of the inner bar. We are looking for entry signals only the first 9 hours after 6:00 GMT.

Trading management and exit from the market

We enter the market with three orders - A, B, and C of the same size. We place orders A and B with Take-Profit that is equal to StopLoss, and we place C order without Take-Profit.

We will keep it in the market until the trend has reversed. Order A brings us the profit, order B covers possible stop-loss of C order, and order C is a source of potentially large profits.

Let’s look at an example.

1. At 6:00 GMT we defined price line on the chart.
2. We discovered an Inside Bar pattern formation above the price line - it means we going to BUY.
3. We set 3 pending orders (A, B, C) slightly above Inside bar internal candle. We set Stop-Loss for all three orders, in this case, it will be X pips. Also, we set Take-Profit for A and B order, it will be equal to SL - X pips. We leave C order without TP.
4. The price moved up and our three orders are triggered. Orders A and B closed with TP (X pips equal SL pips), order C we leave for without TP.

Now let’s look at an example with SELL trade. Everything the same, just in opposite way.

How we control C order later? We will move Stop-loss of C order on the trend behind the simple moving average with the period of 20. I.e. with each candle we will move StopLoss closer and closer to the current price at the level of moving. If the price moves in our favor, StopLoss moves after it, if the price moves in the opposite direction, StopLoss stays in place.

Let’s analyze an another example.

1. At 6:00 GMT we defined price line on the chart.
2. Later, we discovered an Inside Bar pattern formation above the price line - it means we going to BUY.
3. We set 3 pending orders (A, B, C) slightly above Inside bar internal candle. We set Stop-Loss for all three orders, in this case, it will be 18 pips. Also, we set Take-Profit for A and B order, it will be equal to SL - 18 pips. We leave C order without TP.
4. The price moved up and our three orders are triggered. Orders A and B are closed with TP +18 pips, order C we leave free run.
5. Later, order C was closed with TP +165 pips.

In this case, our risk/reward was 9/1: TP was 9 times bigger than SL. This tactic sometimes allows you to get the profit that is 20-30 times more over Stop-Loss.

Each item in this system is tracked separately, independently of the market orders.

Hot Hand Rule

Another rule of DIBS Method strategy is to trade only the pairs that are moving. We feed a horse that runs.

How is it done? Quite simple.

We open daily chart (D1) and apply the moving with the period of 20 (SMA). The price must be above or below the moving, but not on the line. Also, the moving should have a slope not to get the balance of the current price and get prerequisites for a possible move (it doesn’t matter which way).

Trading on the higher timeframes

You can trade DIBS Method on longer timeframes, H4, and D1. Everything happens as when trading on the hourly charts, but for the benchmark we take the open price of the week (W1 chart, the candle of Monday). If the breakout of the inside bar is below the open price of the week, we sell only, if it is above, we buy only.

Money management and additions

Watch out the risk: because we use 3 orders in this system, 3 Stop-Losses are possible. The risk for one order should not exceed 0,3-0,5% of the deposit. This indicator will help you to calculate the lot.

• We ignore news releases
• Make sure that the inside bar is not large, because the meaning of the pattern (the agreement between buyers and sellers) is lost in this case.
• Don’t forget to pay attention to the levels of support /resistance.

 

Summary

DIBS Method Forex Strategy is very simple. This is its advantage and it is what lets the strategy be effective for many years. Small risk and unlimited profit — it is easy to apply the principles of DIBS in theory, but it is difficult to use it in practice as it is psychologically hard to keep a profitable trade because we have a paradigm that is imposed by the advertising — “Get everyone here now!”. However, if you do some work on yourself, the principles of trading management of this strategy (even with other rules of entry) will make you a millionaire sometime.

Take care, Michael

ForexTraderPortal.com