The Gimmee bar is a classic entry pattern for a sideways market shared by Joe Ross – an experienced trader and educator. He is the author of several well-known trading books including Trading by the Book and Trading by the Minute.
This trading strategy looks for a reversal down from the top of a trading range, or a reversal up from the bottom of the trading range.
Trading Rules – Gimmee Bar
Long Trading Strategy
- Prices falling within a trading range
- Price must tag the lower Bollinger Band
- Wait for a bar that closes higher than open (This is the Gimmee bar.)
- Buy one tick above Gimmee Bar
Short Trading Strategy
- Prices rising within a trading range
- Price must tag the upper Bollinger Band
- Wait for a bar that closes lower than open (This is the Gimmee bar.)
- Sell one tick below Gimmee Bar
Important Trading Exceptions
Joe Ross warned against trading Gimmee bars with any of the following traits:
- The Gimmee bar overlaps or is close to the moving average.
- The Gimmee bar has a wide range compared to the previous bar.
- The bar after the Gimmee bar gaps and opens beyond the range of the Gimmee bar.
Gimmee Bar Trade Examples
Winning Trade – Gimmee Bar
This chart shows the daily price bars of Liberty Interactive. This Gimmee bar achieved more than what we expected and started a whole new downtrend.
- Prices tagged the Bollinger Bands three times without breaking out, confirming a sideways market.
- Prices touched the upper Bollinger Band. Two bearish reversal bars emerged. Both were Gimmee Bars, but the market only triggered the second one.
- Prices moved quickly down to the lower Bollinger Band, which was the ideal target for bearish Gimmee bars.
Losing Trade – Gimmee Bar
This is a 20-minute chart of 6J, the JPY/USD futures contract.
There are many profitable Gimmee bars here, but we are focusing on the failed instance.
- This sideways market had many Gimmee bars as marked out by the gold arrows.
- This Gimmee bar touched the moving average. According to the exceptions mentioned, we should not take this trade.
- The last Gimmee bar before the upside break-out failed after tangling with the moving average for a while. For Gimmee Bars that are also reversal bars, consider placing your stop-loss just above the high of the previous bar (dotted line). Doing so can improve your reward-to-risk ratio.
This failed trade reminds us that the longer a sideways market lasts, the more likely a break-out will succeed.
Moreover, it occurred shortly after the Tokyo opening when we expect greater volatility.
Review – Gimmee Bar Trading Strategy
This trading strategy combines Bollinger Bands with price action to take range-bound trades.
The trickiest part of this trading setup is to confirm a sideways market.
If the market is in a trading range, you can use a reversal bar pattern to aim for consistent small profits. Candlestick reversal patterns should work well too.
Range-bound trading aims for smaller but more consistent profits. However, you should still pay attention to your reward-to-risk ratio.
If prices are tightly congested (narrow Bollinger Bands), you have limited profit potential.
Nonetheless, in a sideways market, prices should bounce off the Bollinger Bands without pushing much beyond them. Hence, tighter stops are often possible and can improve the reward-to-risk ratio.
The three critical exceptions Joe Ross highlighted extends beyond this trading strategy. They describe price action that does not bode for trade entries. You will find those exceptions helpful for other trading strategies as well.
A last note for day traders. The time of the day is important. Avoid high-volatility periods during which range breakouts are more likely.
Any advice for stop losses? I use a 2:1 risk ratio, so for narrow bands I find the market tends to hit my stop loss and if I didn’t implement a SL i would have made money. So if trading narrow bands should I change my ratio to 2:2?
You shouldn’t set your stop-loss based on a reward to risk ratio as that approach disregards price action. You can read this tutorial on setting stop-loss and this guide on volatility stop-losses.
IN THE WINNING TRADE THAT IS SHOWN, THE BAR AFTER THE GIMMEE BAR MEETS THE 3RD CONDITION ABSOLUTELY I.E.THE FOLLOWING BAR OPENS WITH A GAP. DOES THAT MEAN THAT THE WINNING TRADE WAS MORE OF LUCK RATHER THAN A REAL WIN?
ALSO THE GIMMEE BAR HAS A WIDE RANGE THAN THE PREVIOUS BAR…SO CAN YOU STILL LABEL IT AS A GIMMEE BAR?
The gap in the third condition (under trading exceptions) refers to a wide gap that goes outside the range of the previous bar. In this case, although there’s an opening gap, the Gimmee bar opened within the range of the previous bar.
As for a Gimmee Bar with a wider range, you can still label it as a Gimmee bar, but you should recognize that they might be inferior and hence be more selective when you consider them.
MANY THANKS. WITH DUE RESPECT GALEN, IT IS THE BAR AFTER THE GIMMEE BAR THAT I WAS REFERRING TO (AS WELL AS THAT MENTIONED IN THE EXCEPTIONS), IT HAS OPENED WITH A GAP DOWN & ONLY THE HIGH TICK IS WITHIN THE RANGE OF THE GIMMEE BAR. SINCE THAT FALLS IN THE EXCEPTIONS & SO DOES IT WARN OF AN INFERIOR TRADE WHICH SHOULD BE AVOIDED. IN THIS CASE I WISH TO KNOW & LEARN IF THIS WAS A WARNED TRADE & WINNING WAS A MATTER OF LUCK THAT THE MARKET WENT THAT WAY. I DO ACKNOWLEDGE THAT THIS IS A PERFECT SCIENCE & THAT MARKETS HAVE THEIR OWN MIND…
Hi Satish, I get what you mean now, and I apologize for misunderstanding your question earlier.
The 3rd exception can only apply if you are using a limit order that can be canceled in the case of an opening gap. However, I’m used to entering with stop orders and have presumed the same in the examples above. This is why I’ve implicitly disregarded the 3rd exception in the examples.
More importantly, you can only judge if it’s just a lucky trade within the context of your entire trading strategy. Mainly, we will want to know if this trade is consistent with other trades taken. The rules above are ultimately guidelines and you can decide how much weight to give to each exception. With a single trade, it’s not possible to judge the factor of luck.
Nonetheless, within my price action framework, this trade was worth taking as it was also testing a resistance level projected by congestion zones to the left (first circle). Congestion zone is a pattern I covered in-depth in my .
Thank your your teaching and abundant contents of your website.
How long should I hold stop orders? In My trading setups orders are canceled after not triggered next bars, and in Hikkake trade setup orders are canceled after not triggered three bars.
Thank you for your comment! I expect my orders to be triggered by the next bar, especially for failure setups like this one. If not, I cancel the order. But this is not a fixed rule and you can adapt it to the price action you observe.
Hola Galen un gusto, sigo mucho todos tus documentos, en este caso particular cual es la configuracion de las bandas de bollinger y la media movil mecionada
Hi Robin, glad to hear from you. Here, the Bollinger Bands have a lookback period of 20 and a standard deviation multiple of 2. Have a great day!