Inside Bar Pattern What Is It, How To Trade?
When followed by a breakout, it can attract attention from traders who focus on price setups. Many traders view it as a signal that attention should be paid to what happens next. Traders can trade an inside bar candle pattern by placing a trade in the direction of the breakout of the inside bar. Once our inside bar has formed we must consider the fact that market reversals can occur on any timeframe.
The Market Psychology Behind Inside Bars
The inside bar is a two bar candlestick pattern, which indicates price consolidation. In order to confirm this pattern you need to see a candle on the chart, which is fully contained within the previous bar. In this manner, the inside bar candle should have a higher low and a lower high than the previous candle on the chart. NR7 is similar to NR4, with the key difference being that NR7 refers to the narrowest (smallest) range among seven consecutive candles. An NR4 pattern can evolve into an NR7 if the 7th candle has the smallest range among the last seven candles. Additionally, NR7 is considered more significant due to the longer period of consolidation, often leading to a stronger breakout compared to NR4 or the Inside Bar pattern.
- By recognizing the importance of inside bars, traders can incorporate this pattern into their trading strategies and gain an edge in the market.
- See that the highest and the lowest points of the small bullish candle are fully contained within the previous bearish candle.
- When you spot a breakout through one of these two levels, then that would give you a signal in the direction of the breakout.
- Inside bar trading is a simple and versatile trading strategy that can be applied across various financial markets and timeframes.
- Built upon the foundations of our tried-and-tested trading strategies, our proprietary indicators for TradingView will give you the confidence to make well-informed trading decisions.
The Inside Bar Pattern: Identification and Trading Strategy
You just need to remember a inside bar candlestick few rules to identify the pattern correctly. To make more money in trading, it’s key to know and use inside bar patterns well. When there are many inside bars in a row, it’s called multiple inside bars.
When this pattern forms at the top of an uptrend, it is considered a bearish reversal signal, and when it forms at the bottom of a downtrend, it is considered a bullish signal. Yes, Inside Bars can be used in day trading, especially on 1-hour or 15-minute charts, though they may be more prone to false signals than on higher time frames. For more information on trading inside bars and other price action patterns, click here.
This is a standard Inside Bar candle where the range of the candle is small, and it’s “covered” by the prior candle. When they do this, they create a secondary pattern known as the hikakke pattern, which is even a stronger confirmation that the trade would move as anticipated. Sarah Abbas is an SEO content writer with close to two years of experience creating educational content on finance and trading. 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.
- Instead, a more complete trading strategy is to use the Inside Bar with other technical indicators and good money management.
- The only difference is that the mother bar is on the left side of the small bar (with the inside variation, it’s on the right side).
- The same is in force for bearish breakout of the inside range, but in the opposite direction.
- You need to look for other confluence factors that support the trade so as to increase the chances of a good outcome.
Note the strong push higher that unfolded following this inside bar setup. A key factor in trading the IB is that it should be supported by a strong level, such as support/resistance levels. Combining the inside bar with key levels and other patterns helps make more confident trading decisions. If pin bar patterns appear after an inside bar, or the pin bar itself is an inside bar, this is a strong signal. As traders, you may have noticed that the two candles in the inside bar pattern often serve as short-term resistance levels.