Inside Bar Trend Analysis Indicators and Signals


As mentioned previously, the inside bar represents a period of short-term consolidation with low volatility within a trending market. Traders then look to trade breakouts after a new high/low is formed. The inside bar is a popular reversal/continuation candle formation that only requires two candles to present itself.

chart time frame

Whether you are a newbie or a novice trader, it is advised to avoid inside bars with large mother bars for now. I see many traders making the mistake of taking inside bar trades without clearly defining their support and resistance levels. It’s like not looking in your rear view mirrors before changing lanes on the highway. You need to know what previous price action has done in order to put the odds in your favor. This is true for any type of price action setup, not just inside bars. If you are a newbie trader, do this until you have mastered and found steady success with the inside bar setup on that frame of time.

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The image illustrates an inside bar on the graph, followed by a Hikkake pattern. To reiterate, the stop loss on this short trade should be located above the high point of the inside day as shown on the image above. We need a place to exit our trades in both profits and in losses.


In the first case, the trader will have to put a large stop, but the trade is more confident. Which entry to choose, the trader decides for himself, depending on the risk appetite, experience and data from other indicators. Newcomers to the market are advised to choose the most conservative trading method. Inside bar signals should be filtered by other methods – moving averages , oscillators, support and resistance levels, trend lines. If the price range of the inside bar is less than 50% of the mother candle, this is an inside bar for a continuation of the trend. Reversal inside bars show the intention to go in the opposite direction more clearly.

If you observe a pattern of successive inside bars that are coiling and all within the preceding bar’s range, this can be a sign of a strong breakout coming. We have prepared this article with the main goal of describing the inside bar Forex trading strategy. For instance, if you are aiming to purchase, you should place a purchase on the stop entry only above the mother bar high. Conversely, if you are aiming to sell, you should place a sell on the stop entry precisely below the mother bar low. As you can see, previous support and resistance levels play an important role when determining whether an inside bar is worth trading.

Countertrend Inside Bars

When the price action completes an inside candle on the chart, you should mark the low and high of the Inside Bar consolidation range. A trading strategy consists of many confluences that make a strategy tradeable. Without confluences, you will not be able to make a profit obviously. The inside bar is the best candlestick pattern and I have used price action with the inside bar candlestick and made the best tradeable strategies. Sometimes, when support and resistance or trendline breaks with a big candlestick then price again come back inward the key level.


This standard candle tells the trader that there is indecision and low volatility within the markets. However, just because you can find the inside bar on all of your time frames does not make them all created equal. For an inside bar to be considered valid both the high and the low of the candlestick or bar if using bar charts need to be completely inside the previous candle. The inside bar pattern is one of the most common candlesticks you will find on your charts. This is part of a new series we are calling «Strategy Myth-Busting» where we take open public manual trading strategies and automate them. The goal is to not only validate the authenticity of the claims but to provide an automated version for traders who wish to trade autonomously.

Support and Resistance Levels Trading Strategy

Whilst you will find the inside inside bar trading strategy on all of your different time frames, the higher the time frame the more weight the pattern holds. The two simplest and most common strategies to trade the inside bar are the inside bar breakout and the inside bar reversal strategy. Inside bars formed on higher time frames will hold more weight compared to inside bars formed on smaller time frames. You will be able to find this pattern on all of your time frames from the one minute chart right through to the monthly chart. The inside bar pattern is a one candlestick pattern where price forms completely within the previous candlestick.

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In other words, the Inside Bar has a higher low and lower high than the previous bar. When this happens the previous bar is known as the mother bar. It does not matter if the Inside Bar is bullish or bearish, all that matters is where the Inside Bar prints relative to existing price action.

Inside bar indicator

We even have a smaller inside just before price pops up over resistance. Formation of inside bar pattern after the breakout of trendline works best and this breakout strategy gives profitable results. Place pending sell stop below the inside bar in case of support zone breakout. On the other hand, place pending buy stop above the inside bar candlestick in case of resistance zone breakout. For example, the market will tend to reverse or continue its direction from a resistance level.

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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. There are a lot of variations, but the approach we define is an inside bar setup, where the inside bar is contained within the range of the foregoing bar from high to low. Additionally, you may have multiple inside bars within the range of one particular mother bar.

A trading strategy can be built both on the “pure” application of the inside and outside bar, and using filters. They can also be used as an additional signal in other strategies. I have the mother bars high and lows sectioned off and the candlesticks forming inside are called the inside bars. You can see that all inside bar setups shown are taking place in chart structure locations – in this case resistance because we are in a down trend.


When you see this pattern, you should position yourself in the market to trade in the opposite direction to the one which you had previously placed. The blue circle on the image points to the inside day candle. Also take note of the three blue arrows at the left side of the image, which shows that the previous three candles on the chart are actually bigger than the inside candle. Therefore, we confirm that the inside candle is also the narrowest range day of the last 4 daily sessions. The image demonstrates an inside day with narrow range a.k.a the ID-NR4 Pattern. Projecting the potential move with Inside Bar Breakouts can be challenging.

Our 10th one we are automating is the » 75% Win Rate High Profit Inside Bar… The chart below shows multiple inside bars in a consolidating market. Notice how it’s very “choppy”, providing no clear directional bias. Note once again that we’re only focused on the mother bar’s high and low, which forms the range of that period. But that’s okay because by the time you finish this lesson you will have a firm grasp of not only how to identify favorable inside bar setups, but how to trade them for a profit. The price range of the inside bar must be less than 50% of the mother candle.

Some traders consider it a continuation pattern though a breakout in the opposite direction is possible too. After price has trended up for an extended period, the pause in price movement precedes a reversal of the trend. Therefore, the inside bar is looked at for a short-term trade in the counter-trend direction with the goal of holding the trade for less than 10 bars. 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. You can enter both on the breakdown of the mother candle, and on the breakdown of the inside bar.

You may also stick to inside bars, which are in-line with the daily chart trend as particular continuation signals, until you have completely mastered trading them that way. The «ATR Pivots» script is a technical analysis tool designed to help traders identify key levels of support and resistance on a chart. When the price exits the inside bar range, we expect that the price action will continue to move in the direction of the inside bar breakout. Inside bars signal continuation or reversals, which makes this trading pattern more complex. That is, the strategy is the foundation with the inside bar seen as more of a prompt.

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