The Inside Bar Trading Strategy Guide

If you’re long, then you want to exit your trade before Resistance or swing high. But the next thing you know, the market does a 180-degree reversal and collapse lower — and you’re sitting in the red. So, you go long when the price breaks above the highs of the Inside Bar. Discover how you can generate an extra source of income in less than 20 minutes a day—even if you have no trading experience or a small starting capital. Of course, a trend can be difficult to identify, so be sure that you have a concise definition of what a trend looks like for you.

1. In a downtrend, look for the inside bar pattern at the end of a rally to a known resistance level so that you can ride the impulse wave down when the price resumes the decline.
2. Depending on what you are trading and what your end goals are, your exits will vary.
3. If you are short, place your stop loss a few pips above the mother bar’s high.
4. 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.
5. The breakout occurs below the low of the ‘preceding bar’ thus triggering a short entry into the market.

Not a Strong Trend

Keep in mind that you can make almost any line fit some sort of trend or support/resistance level. It also helps when the mother bar has the highest high or lowest low at the support/resistance level. There are 2 basic types of Inside Bars that traders use to enter trades. If you want to master your game, you need to learn how to read the entire price action to understand the broad market context. For a long position, place your stop loss a few pips below the mother bar’s low.

Trade Like a PredatorHunt for Opportunities

You will want to see many of these factors supporting an inside bar pattern before you place your trade. The essence is to quickly get out when the price breaks out of the range. Your profit target should be a few pips before the opposite boundary. Remember, no strategy guarantees success in trading, and losses are inevitable.

Professional Trader, Author & Coach

Locate a candlestick that is completely engulfed by the preceding candle’s high and low. This will be the Inside Bar.If the preceding bar is a red candlestick, the Inside Bar will be a green candlestick, and if the preceding bar is a green candlestick., the Inside Bar will be a red candlestick. If a bullish Inside Bar pattern forms after a significant downtrend, it could suggest a potential bullish reversal. You could consider entering a long position in the direction of the breakout. Conversely, if a bullish Outside Bar forms during a downtrend, it might indicate a possible bullish reversal.

Is the inside bar a good trading strategy?

If you want to capture a swing, then you can exit your trades before opposing pressure steps in. So, a better way to set your stop loss is 1 ATR below the low of the Inside Bar (for long trades) — so your trade has more “breathing room”. Or, you can wait for the candle to close — but you risk missing a big move. You can enter using a stop order when the price breaks out of the Inside Bar. 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.

This will be explained further below in our What to look for section. The inside bar is a two-candlestick pattern that signals trend continuation or reversal. The first candle of the pattern is usually large, called the mother candle, while the next candle is a small candle having low wicks, and is called the baby candle. In another case, when the mother bar does not appear, it’s also called the abandoned baby candle pattern. The inside bar candle pattern is one of the most frequently occurring chart patterns in financial markets.

Effective risk management is about minimising the impact of those losses and preserving capital for future opportunities. There is a saying that states if the only tool you have is a hammer everything starts to look like a nail. If you only use the Inside Bar setup, you are cheating yourself out of a valuable and potentially profitable trade setup. This can help you avoid false signals and acting without having the entire picture of the current market conditions. When range trading, a market must be in a sideways trend, the initial approach is to wait until the Inside Bar pattern emerges. As you can see, when the inside bar pattern appears, the RSI stands at around 40-45, a level indicating indecision and the market and, thus, the likelihood of consolidation.

To enhance your trading strategy, add a Relative Strength Index (RSI) indicator as a complementary tool to your Inside Bar analysis. This enables you to assess whether the price has the potential to persist in its current trend, undergo a reversal, or remain within the range. It can make you a profitable https://forexhero.info/ trader if you will use it in the correct way. Remember, candlestick patterns are not foolproof signals, and the Inside and Outside Bars should be used as part of a comprehensive trading strategy. Always test these methods thoroughly and ensure they fit within your overall trading plan.

The InSide Bar Strategy is a significant candlestick pattern that helps traders time entries with low risk. This strategy can be used to follow and trade with a trend or with reversals. An InSide Bar is a candle that is essentially “covered” by the previous inside bar trading strategy candle. When you see this type of candle, it usually means that there has been reduced volatility within markets. The InSide Bars are not all equal in terms of size and range, and it is important to keep this in mind throughout your analysis.

Additionally, the Inside Bar pattern provides even more accurate signals when clubbed with a technical indicator like RSI. Inside bar trading offers ideal stop-loss positions and helps identify strong breakout levels. You can create a successful risk management strategy and place successful trading orders with it.Our article will discuss the Inside Bar trading strategy and how to identify ideal price levels with the same. The critical point here is the third candlestick that rises above the second candle and indicates that the price is likely to increase. To confirm that, we used a basic moving average indicator, and, as seen in the chart, the crossover occurs precisely at the formation of the mother candle (the first candle).

When combined with other tools or indicators, trading with the inside bar provides an excellent and straightforward smart trade management strategy. Although it is not a decisive chart pattern like many other chart patterns, it certainly enables traders to find many trading opportunities. The second way to trade the inside bar pattern is the inside bar breakout trading method, which many believe is slightly more exciting to trade.

Traders have developed a significant number of advanced strategies using inside bars to recognize and trade potential reversals, and bearish patterns, and better recognize current trend reversals. Again, learning to identify important support and resistance levels is all a matter of practice. They usually use 2-3 moving averages and when they are in order from shortest to longest period, that call that a valid trend.