The Inside Bar Trading Strategy Guide

bar candlestick pattern

It is important to learn the structure of the inside bar pattern. It tells the traders that the market is looking for direction. Big institutions and big traders are deciding either to upward or downward. Again, learning to identify important support and resistance levels is all a matter of practice. Price action is also in a range and there is no obvious trend or support/resistance level.


You need to move the mouse over a candle or bar, an information window will appear with data on the minimum, maximum, closing and opening prices. Inside and outside bars in trading – how to read, decoding. One of the simplest strategies in the market is inside and outside bar trading. They are easy to find on the chart, the risk is clearly understood, and signals are worked out well on large timeframes.

Don’t make this common mistake when trading the Inside Bar…

The first candle has a tall body, sometimes very large wicks, and is called the mother bar. The second candle has a small body, sometimes having low wicks, and is called the baby candle. The inside bar formation is completed when the second candle closes within the body of the mother candle. Live streams Tune into daily live streams with expert traders and transform your trading skills. The reason behind this is that the lower time frames are generally influenced by noise, and therefore they might end up producing false signals.


So, a better way to set your stop loss is 1 ATR below the low of the Inside Bar — so your trade has more “breathing room”. Now, don’t worry about how to set your stop loss or trade management because we’ll cover that later. Now, you’ll learn how to use the Inside Bar strategy to catch the trend.

What is an inside bar?

As a beginning trader, it’s easiest to learn how to trade inside bars in-line with the dominant daily chart trend, or ‘in-line with the trend’. Inside bars at key levels as reversal plays are a bit trickier and take more time and experience to become proficient at. In the example below, we are looking at trading an inside bar pattern against the dominant daily chart trend. In this case, price had come back down to test a key support level , formed a pin bar reversal at that support, followed by an inside bar reversal. Note the strong push higher that unfolded following this inside bar setup. As the name implies, an inside bar forms inside of a large candle called a mother bar.

So if your take profit is 200 pips, your stop loss can be no more than 100 pips away from your entry price. Below are two examples of inside bar patterns that formed in different market conditions. The first example is what you want to look for while the second is what you should avoid. Truth is, a favorable inside bar setup doesn’t come around often. Of the price action strategies we use here at Daily Price Action, the inside bar is the least common.

Here’s an example of how one should trade the inside day candle pattern in a ranging market. Before trading a trending Inside Bar, be sure that there is a strong trend in place. That may sound obvious, but many traders are so eager to enter a trade, that they don’t spend a few extra seconds examining the strength of the trend. It also helps when the mother bar has the highest high or lowest low at the support/resistance level. No pattern is the holy grail of trading, and the inside bar pattern, like many other classical chart patterns, has strengths and weaknesses. Some traders use a more lenient definition of an inside bar that allows for the highs of the inside bar and the mother bar to be equal, or for the lows of both bars to be equal.

As you already know, in Forex trading nothing is 100% certain. Patterns can and do fail, but many times these failed patterns can offer nice trading opportunities for those whose are quick to recognize the fakeout. The black levels point out to the pattern’s high and low.

Inside bar pattern will help in identifying changes in the trend:

Seek the how to trade inside bar of a qualified finance professional before making any investment and do your own research to understand all risks before investing or trading. TrueLiving Media LLC and Hugh Kimura accept no liability whatsoever for any direct or consequential loss arising from any use of this information. Even if you do not trade this setup, it can be used as a confirmation when used in conjunction with another trading system. To get more chart patterns that you can test, go here to get the PDF cheat sheet. The other type of Inside Bar trading signal is the countertrend Inside Bar.


Make sure the baby candle closes within the mother candle. I have been wondering how best to trade inside bars, and you have explained it so well. To the point explanation about the pattern like how to trade inside bar pattern and if there is any whipsaw use it in your favor and other important points. This means you could get a good R multiple on your trade in a short amount of time. So, if you trade a small range Inside Bar, it means volatility is low and there’s a good chance it could expand in your favour. And with a smaller stop loss, you can put on larger position size and still keep your risk constant.

When looking at a candlestick chart, you can spot an inside bar indicator when a given bar’s high and low are fully contained by the bar directly preceding it. This signals a narrowing of price action that can be used to predict upcoming movements outside of this range. When you discover an inside bar breakout on the chart, you will most likely want to trade in the direction of the breakout. The price action might reverse direction and quite possibly could break the range of the pattern from the opposite side.

The inside bar is a figure of uncertainty, the participants are not sure about the further movement. The breakout of an extremum means determining the direction, so when the breakout is in the direction of movement, the price accelerates. But the breakout is not always true, there are false breakouts, the price consolidates near the inside bar. The trader always knows exactly where to place a reasonable stop and limits losses in case of an erroneous entry.

When the inside bar forms at that resistance level, it is a clear indication that the market is deciding its future direction. Breakout of the inside bar pattern confirms the direction of the market. If the price breaks high of the inside bar, then it will continue its trend . Price will reverse its trend if it breaks the low of the inside bar. Again, some traders can get so wrapped up in taking trades that they forget to examine the quality of the signal. If you are still struggling with drawing support and resistance levels, read this guide.

We use the in you provide to contact you about your membership with us and to provide you with relevant content. Get ready to receive cutting-edge analysis, top-notch education, and actionable tips straight to your inbox. So, a buying signal is given once the third candle closes above the previous bar. Additionally, the volume provides another confirmation that buying pressure is building up.

To get more practice, draw major levels on all of your charts, then go back to them later and see if price ended up respecting those levels. After a few weeks of this exercise, you’ll start to get the hang of it. The key is to be able to understand which levels are most likely to hold and which ones are just random lines on a chart.

Trade setup for today: Top 15 things to know before the opening bell – Moneycontrol

Trade setup for today: Top 15 things to know before the opening bell.

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Stop loss should be placed behind the nearest level behind the extremum of the inside bar or the mother candle. In the first case, there will be more losing trades, but the total loss will be less. Each transaction will not cause significant harm to the deposit. If the inside bar is a doji or a pin bar, it should not be considered for entering the market.

Main admirable thing is in your forex topics is, that you always try to explain the context in very simple and easy ways. To identify the inside bars you could, but not to trade them, as filtering must be applied. The user is in a position, sees a large candle in the direction of the deal.

Trading Fuel is our blogging website where we provide you with blogs related to technical analysis, share market, finance, and economics. So when there are multiple inside bars, we have to be ready for a big move in the market. There are also candles with an inside bar with a large range. This bar is the standard inside bar where the range of the candle is small and is covered by the previous candle. These two levels will be used as the triggers for any potential trade. In the entire trend, the consolidation is triggered when longs decide to begin taking profits, in other words, sell.

There must be a directional move before the pattern appears. When trading intraday, you should trade in the American session. You should not trade if the inside bar has long shadows – doji or pinbar. We mark the inside candle’s high and low as in the previous two examples .

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