Before starting Trading Heroes in 2007, I used to work at the trading desk of a hedge fund, for one of the largest banks in the world and at an IBM Premier Business Partner. To start tracking Inside Bars on your charts, use one of our handy alert indicators. If you trade every single Inside Bar signal, you WILL blow out your account. Generally, the stop loss would go on the other side of the mother bar.

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These traders must be nimble and ready to act quickly as the market unfolds. On the other hand, swing traders may prefer to analyze daily or weekly charts where Inside Bars can signal more significant trend-following or reversals, with trades that may last several days to weeks. Regardless of the time frame, traders should adjust their risk management and trade sizing accordingly. Understanding price action strategies is crucial for traders because it forms the foundation of technical analysis. Price action trading focuses on the movement of an asset's price over time, allowing traders to identify trends, reversals, and potential trading opportunities.

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A daily chart inside bar will look like a ‘triangle’ on a 1 hour or 30 minute chart time frame. They often form following a strong move in a market, as it ‘pauses’ to consolidate before making its next move. However, they can also form at market turning points and act as reversal signals from key support or resistance levels.

Inside Bar Pattern Introduction:

If aiming to ride a trend, however, traders tend to trail their stop loss just as the market begins to adjust to their prediction. This bar is still “covered” by the previous candle, but the range is larger than the standard. Depending on the close, the bar could represent indecision, trend, or a reversal within the market. But, it’s more powerful since breakout traders got caught on the wrong side of the move (and their stop orders would push the market in your favour). Sometimes, you can trade an inside bar as a reversal / stall pattern where price “stalls” out at a level and that leads to a reversal back the other direction.

1. Inside bars are truly one of the most interesting and powerful price action signals so I hope you enjoyed learning about them and that you’ll continue to do so.
2. The more the difference between the Mother Bar and Inside Bar, the higher the chance of the market reversing and vice versa.
3. Again, learning to identify important support and resistance levels is all a matter of practice.
4. The inside bar setup gives you exact places to put your important stop loss as a breakout of an inside bar should be met with momentum if it is a true resolution of the price pattern.

In fact, the trading decision is typically made after the completion of this third candle. Even though the pattern is known as having a structure with one large bullish or bearish first candle and a second smaller candle, it could have many other chart formations. For example, the inside bar pattern could also be formed with a large first candle and a second tiny Doji candle. Technically, as long as the first candle covers the second candle, then it’s an inside bar pattern. The standard InSide bar has a small range and is “covered” by the previous candle. This standard candle tells the trader that there is indecision and low volatility within the markets.

As with any trading strategies, there is no one-size-fits-all approach, and the Inside Bar strategy is no exception. It requires adaptation to the market’s changing rhythms and personal trading style. As mentioned above, the inside bar is inside bar trading strategy a two-candlestick pattern that may appear in any market scenario. Identifying the inside bar is not rocket science, and once you have a basic understanding of what it looks like, you will be able to locate it instantly on price charts.

This can be considered a failed breakout and such reversals can see a significant shift in market sentiment. This is because an attempt at directionality was made, and failed, and the market has now lost confidence in that break and looks for action in the opposing price range. The inside bar pattern should be considered a valuable tool in the world of price action trading, offering valuable insights into potential trading opportunities.

When you combine a pin bar into an inside bar, you are getting both a “wind-up” that is going to be released and a pin bar with a tail / shadow that indicates the next potential direction of the market. Hence, an inside bar is not just a pause in the market, it’s a pause with an extra piece of confluence behind it, and as a result, a more powerful price action signal. For more information on trading inside bars and other price action patterns, click here. The high and low of the mother bar actually forms a short term support or resistance price and the inside bar shows that, at that point, there is not enough conviction in either direction.

Notice that the inside bar formed at a key chart level, indicating the market was hesitating and “unsure” if it wanted to move any higher. We can see a strong downside move occurred as price broke down past the inside bar’s mother bar low.. An inside bar is much easier to take in a trending market because the odds are already in your favor for trading with the trend. The inside bar will many times lead to a breakout or continuation in-line with the existing trend direction. They can provide a good structure to try to pyramid your trade into a huge win.