Best Inside Bar Trading Strategy

In other words, the Inside Bar has a higher low and lower high than the previous 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. The GBPUSD chart below shows a downtrend, with the Fibonacci levels acting as resistance levels. The tool helps you to predict the levels in the market that can potentially act as a support or resistance level. 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. In the AUD USD chart below, the price is trending up and broke the resistance level, which later became a support level.

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Virtual Assets are volatile and their value may fluctuate, which can lead to potential gains or significant losses. If you do not understand the risks involved, or if you have any questions regarding the PrimeXBT products, you should seek independent financial and/or legal advice if necessary. Inside Bar setup can be another weapon in your arsenal when trading and creating an effective strategy. It can be used given the right conditions to place potentially profitable trades by forecasting subsequent price action. A breakout above or below the Inside Bar’s range serves as a signal to enter a trade, anticipating a price movement in the direction of the breakout. For example, you may see the Inside Bar candle pattern develop, but it seems to be testing the range of resistance or support.

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  1. This is still an Inside Bar as the range of the candles is “covered” by the prior candle.
  2. The InSide Bar Strategy is a significant candlestick pattern that helps traders time entries with low risk.
  3. Nial Fuller is a professional trader, author & coach who is considered ‘The Authority’ on Price Action Trading.
  4. It can make you a profitable trader if you will use it in the correct way.
  5. 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.

In this section, we will define the inside bar pattern and guide you through the process of spotting this unique formation in various markets. Inside bars signal continuation or reversals, which makes this trading pattern more complex. False breakouts can occur which lessens the reliability of the inside bar as an isolated pattern which is why traders prefer using the inside bar as part of an overall forex trading strategy. That is, the strategy is the foundation with the inside bar seen as more of a prompt.

Inside Bar Chart Pattern Trading Strategies and Examples

We added the Relative Strength Index (RSI) indicator as our confluence trading tool to see if the price continues with the trend, reverses, or stays in range mode. In a strong trending market (when the price is above 20MA), the pullback is shallow. The classic entry for an inside bar signal is to place a buy stop or sell stop at the high or low of the mother bar, and then when price breakouts above or below the mother bar, your entry order is filled.

Some inexperienced traders trade the pattern against the direction of the main trend thinking it can cause the trend to reverse. Oscillator indicators are very helpful in trading a ranging market since they show when a price move is losing momentum and likely to reverse. When the price reaches any of the boundaries, look out for an inside bar pattern.

The pivotal moment happens with the emergence of the third candlestick of the Inside Bar chart pattern, surpassing the second candle and signalling a potential uptick in the price. In this scenario, you must have pinpointed the Inside Bar setup characterised by a notably large bullish candle succeeded by a smaller bearish candle, encapsulated by inside bar trading strategy the first candlestick of the Inside Bar pattern. There are various types of Forex trading strategies that you can use with the Inside Bar pattern, including range and breakout trading. As mentioned above, when trading the Inside Bar chart pattern you need to look for the mother bar or candle, followed by the smaller candle, called the baby bar.

Some traders prefer to enter using a stop order and when the price breaks out of the InSide Bar. Many like this method because they enter the trade just as price moves in their favor. Please be mindful, however, that there is a possibility of a false breakout in this case. Traders could also wait for the candle to close, but this comes with the risk of missing a big move in the market. This pattern tells the trader where there is low volatility within the markets.

To be sure that the market is actually in a range, you need to mark out the boundaries by connecting two consecutive swing highs as the upper boundary and two consecutive swing lows as the lower boundary. So, you must be ready to get out fast if a breakout happens, since the price can move very fast in such situations. Derived from the ratios of the Fibonacci sequence, the retracement levels estimate the percentage of the preceding impulse that the pullback can get to before reversing. TrendSpider’s Strategy Tester is the industry’s most powerful backtesting solution.

If the currency pair prices diverge from the existing trend before the price consolidates, a reverse price breakout is confirmed. The Inside Bar pattern works best when the market is currently trending. The stronger the trend, the easier it is for the pattern to provide a reliable signal. If the market is not showing any certain trend, the Inside Bar pattern will not be able to form due to the uncertain market movement.

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