InSide Bar Strategy

The first example is what you want to look for while the second is what you should avoid. Notice how the second candle in the image above is completely engulfed, or contained, by the previous candle. In this case, the bearish candle (mother bar) represents a broader downtrend, while the bullish candle (inside bar) represents consolidation after the large decline.

Rainbow Trail Forex Trading Strategy

Our weekly digital publication of actionable swing setups, with a horizon spanning from days to months, driven by “FunTech”, our proprietary mix of Fundamentals and Technical Analysis. These entry inside bar trading strategy points allow you to participate in the breakout as it’s happening, rather than trying to predict direction in advance. Copyright © 2025 FactSet Research Systems Inc.© 2025 TradingView, Inc.

Rules to Identify a Valid Inside Bar Pattern

To get more chart patterns that you can test, go here to get the PDF cheat sheet. 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. We see this on longer timeframes when price forms a “box,” or a tight range. This is one of the most popular technical chart patterns around and there are several trading strategies that utilize this pattern.

• For traders, choosing between trading Inside Bars and Outside Bars depends on the preferred market conditions.
• Ideally, the Inside Bar should form within the upper or lower half of the Mother Bar.
• The best time to trade is when the stock comes out of the choppy phase as it is expected that the previous trend is set to resume.
• You will see it in many different markets and on all of your different time frames.

In this article, we will look at the Inside Bar pattern in details and develop an EA for tracking the Inside Bar and performing trades based on the pattern. As you can see, previous support and resistance levels play an important role when determining whether an inside bar is worth trading. So, what this means that relative size of the inside bar to the mother bar is important, but support and resistance levels are equally important. An inside bar is a candlestick pattern where the high and low prices are within the range of the previous candle.

• As mentioned above, the inside bar is a two-candlestick pattern that may appear in any market scenario.
• Experienced traders might choose different entry points or stop loss placements based on their strategies and preferences.
• Inside bar patterns work well at those trading range extremes because the pattern suggests a pause.
• Bullish Inside Bars are most effective when they appear after a retracement or consolidation within a strong uptrend.
• This data tells you that again, when price breaks above/below the previous day’s high/low, you want to be expecting continuation, not a reversal.

Price action is also in a range and there is no obvious trend or support/resistance level. You might have been lucky if your took a long trade, but over time, you’ll lose more of these trades than you win. A bearish inside bar pattern has a candle within the range of the previous one. Traders will get better at handling complex markets by using what they learned. Adding inside bar patterns to their analysis can boost their performance. In the stock market, inside bar patterns help predict breakouts.

Many traders face the same struggle, constantly switching between strategies in search of something that works. An Inside Bar Fakeout happens when the price initially breaks out of the Inside Bar pattern but quickly reverses, trapping traders who entered too soon. Whilst you will find the inside bar on all of your different time frames, the higher the time frame the more weight the pattern holds. The key to the inside bar reversal strategy is where the inside bar forms. 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.

Once you learn how to identify this pattern, then you will very quickly start seeing it everywhere. You will see it in many different markets and on all of your different time frames. Most importantly, successful trading involves much more than recognizing a single pattern.

Sarah brings a unique approach by combining creativity with clarity, transforming complex concepts into content that’s easy to grasp. Leverage can amplify profits with Inside Bar strategies, but it also increases risk. It’s best to use low leverage until you gain experience with this strategy. A common question is understanding the differences between Inside Bar and Engulfing Bar patterns, as both involve two candles. This can be an early warning that a breakout might not be strong or that a reversal is more likely.