Forex & Stocks Inside Bar Trading (Recognizing Profitable Inside Bar Patterns)

The Inside Bar pattern appears quite often on charts, but not all of them can be considered profitable. This is because it requires a strong trend to detect a valid Inside Bar pattern. However, before diving deeper into identifying profitable Inside Bar patterns, do you already know the essence of this candlestick formation?

As the name suggests, an Inside Bar refers to a candlestick shape that lies within the price movement range of the previous candle (Mother Bar). Even though this term is assigned to a single candle pattern, many traders consider the Inside Bar as a two-candle pattern because it involves the presence of the Mother Bar as a condition for the Inside Bar to form.

The Inside Bar pattern is believed to give off very strong and profitable signals if traded correctly. This formation is considered to represent a consolidation phase after a significant movement, providing the right opportunity for traders to enter and ride the next big move.

Understanding the Inside Bar pattern more easily, here are the important facts to note:

1. Inside Bar must be within the previous candle’s range.
2. It consists of 2 candlestick patterns.
3. The Mother Bar can be bullish or bearish.
4. Inside Bar can be bullish or bearish.

 

Like we talked about earlier, the Inside Bar pattern shows when the price is taking a break in the middle of a strong trend. So, after this Inside Bar forms, experts expect the price to keep going in the same direction as the trend.

To make sure the trend will continue, it’s important to watch for a breakout confirmation from the Inside Bar. Basically, if the price breaks out of the Inside Bar zone, it means the consolidation time might be over, and the market is ready to keep following the previous trend.

The key here is looking at the range of the Mother Bar, which is the highest and lowest prices of the candle just before the Inside Bar. Take a look at the example chart below.

During an uptrend, the price takes a break and forms an Inside Bar pattern. When the candle after the Inside Bar moves up past the High of the Mother Bar, that’s a good time to use the buying momentum.

Some cautious traders wait for the candle after the Inside Bar to close to make sure it’s a bullish formation confirming the uptrend. On the other hand, more aggressive traders tend to act as soon as the candle after the Inside Bar breaks the High of the Mother Bar. Some even use the Inside Bar’s High to decide when to enter a trade.

Both approaches have their pros and cons, depending on how much risk you’re comfortable with. If you prefer being careful and safe, it’s better to follow the cautious trader’s steps and ensure the candle closes strong first. But if you’re more of a risk-taker, the aggressive trader’s approach might suit you better as it helps avoid missing out when the price rises above the Mother Bar’s High.

• Download “TraderVersity-InsideBarSystem” (Zip/RAR File).
• Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
• Copy the “TraderVersity-InsideBarSystem.tpl” file (template) to your Metatrader Directory …/templates /
• Start or restart your Metatrader Client.
• Select Chart and Timeframe where you want to test your forex system.
• Right-click on your trading chart and hover on “Template”.
• Move right to select “TraderVersity-MoneyFlowIndexSystem” trading  system and strategy
• You will see “TraderVersity-InsideBarSystem” is available on your Chart

The Entry rules for the Inside Bar pattern actually vary based on your trading style. Make sure the breakout really happens above the High or below the Low of the Mother Bar to trigger your Entry. Without this breakout confirmation, you risk getting stuck in a continuing ranging trade because there’s no certainty that the consolidation has ended.

For Exit strategies, you can set a Stop Loss below the Low of the Mother Bar (for buy positions) or above the High of the Mother Bar (for sell positions). If you have profit targets, you can use a risk/reward ratio or apply a Trailing Stop to take advantage of the trend continuing after the Inside Bar forms. The Trailing Stop not only secures your account from big losses but also locks in previously gained profits.

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