Inside Bar Pattern: What Is and How to Trade It on Footprint Charts

This approach enables traders to capture a potentially profitable position at the beginning of the move without constantly monitoring the market. However, the risk is that a false breakout could occur — where the price triggers the order but then returns to the inside bar’s range, leading to losses. The three-bar inside bar strategy is a three-candle variation of the traditional inside bar (with two candlesticks) and is seen as a more reliable trend continuation pattern. If it closes the same color as the mother trend bar, then it signals an early breakout and continuation of the original trend.

A wide range bar takes up more than 75% of the range of the preceding bar. A narrow range bar takes up less than 25% of the range of the preceding bar. We will examine if the following factors affect the performance of inside bars.

The image above shows how all the factors in this model work together. We see the key level, then the inside bar and the pin bar appear. The inside bar here represents a stalemate between buyers and sellers. The subsequent bullish pin bar makes a false breakout of the inside bar and support level.

1. Another aggressive approach to trade inside bars is to often place pending entry orders a few ticks above the high as well as below the low of the inside bar to take advantage of a break of either side.
2. While the setup can be a useful tool for identifying potential breakout or continuation opportunities, it’s important for traders not to rely solely on this pattern for their trading decisions.
3. The traditional entry method for an inside bar setup involves placing a buy-stop or sell-stop order at the high or low of the mother bar.
4. If an inside bar pattern develops during the 8a London to 12p noon New York session, then take an inside bar setup buying a break above the mother bar high or short a break below the mother bar low.
5. But it also means there is less likelihood of being stopped out too early in the trade, i.e., it can give the trade more breathing room.

How reliable is the inside bar pattern in trading?

A bearish mother candle is inside bar trading part of a downtrend, while a bullish inner bar candle represents a slight consolidation. By the time you finish reading this article, you’ll have a firm grasp on how to identify favorable trading setups on the inside bar and benefit from them. An inside bar breakout happens when the price goes past the high or low of the inside bar.

What Are ICT Order Blocks and Breaker Blocks in Trading?

1. The reason for this is that you want to trade your breakout in the direction of the current trend.
2. Inside candles show that there’s indecision in the market, we don’t want to see indecision at places where the market could reverse, we want to see confirmation.
3. Most importantly, when used with price action analysis, the Inside Bar pattern is reliable and profitable.
4. An inside bar is a price action strategy that shows consolidation and that a potential breakout is imminent.
5. As price falls into solid long term support, an informed technical trader should not be surprised to see a potential bounce off the area.
6. This led to market hesitation, causing the price to stop and eventually start to gradually decline.

In forex, the inside bar strategy helps spot trends and find the best times to buy or sell. The forex market’s high liquidity and volatility make this strategy work well, letting traders make the most of big price changes. Building on the inside bar pattern, we can explore advanced trading strategies. We’ll see how to use the inside bar strategy with other technical patterns. Using a good breakout strategy is crucial in the inside bar forex market.

Unlike the Inside Bar, where the second candle is within the range of the first, an Outside Bar occurs when the second candle has a higher high and a lower low than the previous bar. This strategy uses Inside Bar principles to find short-term reversals. Moreover, these patterns can also be combined with other patterns. For instance, an ‘Inside Hammer’ is when the second bar is both an Inside Bar according to the selected definition and shaped like a ‘Hammer’. Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange.

As mentioned above, it’s ideal of the inside bar forms near the pin bar’s nose (real body). Inside Bars are widely used in technical analysis due to their simplicity and potential to catch strong price movements. They can be found in various time frames but are more reliable in higher ones like the daily chart. The Inside Bar Pattern is one of the most significant candlestick patterns used in technical analysis. The pattern has stood the test of time across many markets—Forex, stocks, indexes, and cryptocurrencies. Remember, candlestick patterns are not foolproof signals, and the Inside and Outside Bars should be used as part of a comprehensive trading strategy.

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Traders should look for more volume and speed as signs of a breakout. In short, the inside bar strategy is very useful for both new and seasoned traders. It shows how important it is to understand and apply trading principles well. Knowing how to trade inside bars means spotting these patterns and guessing where the market might go next. The inside bar pattern also gives great breakout trading opportunities, and it’s very simple to trade.

Knowing common trading errors is as important as knowing how to trade with the inside bar method. Your profit target will often depend on the market volatility and behavior of the instrument you’re trading. Stocks, for instance, have a habit of going in one direction for longer than forex pairs. As a result, you may often get away with placing your take-profit target a little farther away from your entry in the stock market than in the forex market. Ideally, your stop loss should be at the other end of the mother candle. So, in a bullish trade, your stop loss will be at the low of the mother candle.

For example, the heaviest volume, and therefore most trending opportunities in forex appear during the London and New York sessions. Outside of this time period, the forex market is known to stagnate and not produce strong trends. Let’s examine our first example to illustrate that an inside bar can be considered a bullish variant based solely on its position on the chart, rather than its color. First, a long-bodied red candle, which serves as the pattern’s first candle (the mother bar), formed. This was followed by a much smaller bearish candle that resembles a doji, given how close the open and close prices are. Despite these two consecutive bearish candles, a confirmation candle then followed, closing above the high of both the first (mother bar) and second (inside bar) candles, signaling a bullish continuation.