This setup is quite famous among Forex traders and is one of the fundamental patterns in the Price Action trading methodology. It is most often referred to the continuation pattern of the main trend, although it can also act as a reversal pattern. In general, the Inside Bar is a pattern for skilled traders, as beginners may have difficulties with its interpretation. However, if you know how to use the Inside Bar correctly and what to pay attention to, you can use it to catch quite strong trends.
✴️ What does this pattern mean?
It means that the strength of the current movement has run out, because the next candle is small, and there is a temporary agreement in price between buyers and sellers. We can say that this is a small truce before a new battle. During this truce we can enter the market and follow the current trend. Or we can enter against the trend. Next, we will look at the correct way to enter and what to pay attention to. As in the case with other Price Action setups, we need to rely on the support/resistance level. If you see an inside bar somewhere in the middle of the chart, you should not enter such a trade, as the pattern has no basis.
✴️ How to enter the market properly?
Let's assume that we have been able to determine that our setup is of high quality, stands level, and meets our trading strategy. There are two most common techniques for entering on the inside bar:
• Classic method to enter on a breakout of the mother candle.
• Entry with a pending order on the breakout of the inside bar itself.
Which method will be the most correct for your trading? It all depends on how confident you want to be in entering the market. The classic entry on the breakout of the mother candle at the high or low point works slower. The point is that you enter the market later, but you get more confidence in the chosen price direction.
Entering on the breakout of the extreme point of the inside bar is earlier, but it is risky. You will enter the market earlier, but if the price breaks the extreme point of the inside bar and then reverses, your stop loss will be triggered.
✴️ How to set stop loss properly?
There are several options for placing a stop loss for this setup.
The first one is the classic one. Stop Loss is placed at the above or below of the mother candle. This option is not very effective, as the parent candle can be very large, so the stop may be too large, and if such an order works, it will harm your deposit quite well.
The next option is to place a stop loss behind the level. This option is already more reasonable, because crossing the level will mean that we were wrong. It should be used when it is adequate. That is, it does not carry risks in a huge number of pips. If the level is not very far from the entry, this option can be used.
And the final method is placing a stop loss above or below of the inside bar. This is also an adequate trading option. One might think that such a stop loss is very easy to take out. It may make us make mistakes many times, but it will also allow us to take occasional profitable trades, which will be several times larger than our initial stop loss.
✴️ How to set take profit properly?
After we have set a stop loss, we need to set a take profit. What are the possible options here? First, we can take profit at the next support/resistance level:
Secondly, stop loss multiplied by N number of pips. There is also a variant of fixed take profit equal to 30-40 pips on a daily chart. This option is suitable for those who like to be sure that the profit will be taken. It may not be quite as big as it could be, but the probability of getting it will be high.
Let's imagine that we have a stop loss set at 20 pips. The price passes 40 pips and we move the trade to breakeven. That is, we move the stop loss to the level of the entry point. Then we set a trailing stop or some distant target. Even if the market turns against us, we will not lose anything. The most common methods of taking profits for this setup are the next level, a fixed number of pips and stop loss multiplied by N.
Which one is the best? It depends on your trading and the market situation. For beginners, I suggest using a fixed level. Set a certain number of pips, depending on the currency pair and timeframe. But it is worth remembering that this fixed number should be larger than the inside bar itself.
✴️ Conclusion
The inside bar is not the easiest pattern to interpret. Good inside bars don't come on the chart very often, so don't look for them where they don't exist. If you are unsure, it is best not to enter the market. Always look at the direction of the inside bar, as it often tells you the future direction of the price.
It is best to enter on the trend, although there are cases when the inside bar appears against the trend. Pay attention to the size of the mother candle and the inside bar. If the mother candle is very large, you should not enter, because a pullback is possible. Try not to trade in flat signals. There should be at least some movement before the setup appears.
If you trade intraday, open positions only during the London and American session. If the inside bar is a doji or pin bar, you should not get involved in such a setup, as nothing good will come out of it.
✴️ What does this pattern mean?
It means that the strength of the current movement has run out, because the next candle is small, and there is a temporary agreement in price between buyers and sellers. We can say that this is a small truce before a new battle. During this truce we can enter the market and follow the current trend. Or we can enter against the trend. Next, we will look at the correct way to enter and what to pay attention to. As in the case with other Price Action setups, we need to rely on the support/resistance level. If you see an inside bar somewhere in the middle of the chart, you should not enter such a trade, as the pattern has no basis.
✴️ How to enter the market properly?
Let's assume that we have been able to determine that our setup is of high quality, stands level, and meets our trading strategy. There are two most common techniques for entering on the inside bar:
• Classic method to enter on a breakout of the mother candle.
• Entry with a pending order on the breakout of the inside bar itself.
Which method will be the most correct for your trading? It all depends on how confident you want to be in entering the market. The classic entry on the breakout of the mother candle at the high or low point works slower. The point is that you enter the market later, but you get more confidence in the chosen price direction.
Entering on the breakout of the extreme point of the inside bar is earlier, but it is risky. You will enter the market earlier, but if the price breaks the extreme point of the inside bar and then reverses, your stop loss will be triggered.
✴️ How to set stop loss properly?
There are several options for placing a stop loss for this setup.
The first one is the classic one. Stop Loss is placed at the above or below of the mother candle. This option is not very effective, as the parent candle can be very large, so the stop may be too large, and if such an order works, it will harm your deposit quite well.
The next option is to place a stop loss behind the level. This option is already more reasonable, because crossing the level will mean that we were wrong. It should be used when it is adequate. That is, it does not carry risks in a huge number of pips. If the level is not very far from the entry, this option can be used.
And the final method is placing a stop loss above or below of the inside bar. This is also an adequate trading option. One might think that such a stop loss is very easy to take out. It may make us make mistakes many times, but it will also allow us to take occasional profitable trades, which will be several times larger than our initial stop loss.
✴️ How to set take profit properly?
After we have set a stop loss, we need to set a take profit. What are the possible options here? First, we can take profit at the next support/resistance level:
Secondly, stop loss multiplied by N number of pips. There is also a variant of fixed take profit equal to 30-40 pips on a daily chart. This option is suitable for those who like to be sure that the profit will be taken. It may not be quite as big as it could be, but the probability of getting it will be high.
Let's imagine that we have a stop loss set at 20 pips. The price passes 40 pips and we move the trade to breakeven. That is, we move the stop loss to the level of the entry point. Then we set a trailing stop or some distant target. Even if the market turns against us, we will not lose anything. The most common methods of taking profits for this setup are the next level, a fixed number of pips and stop loss multiplied by N.
Which one is the best? It depends on your trading and the market situation. For beginners, I suggest using a fixed level. Set a certain number of pips, depending on the currency pair and timeframe. But it is worth remembering that this fixed number should be larger than the inside bar itself.
✴️ Conclusion
The inside bar is not the easiest pattern to interpret. Good inside bars don't come on the chart very often, so don't look for them where they don't exist. If you are unsure, it is best not to enter the market. Always look at the direction of the inside bar, as it often tells you the future direction of the price.
It is best to enter on the trend, although there are cases when the inside bar appears against the trend. Pay attention to the size of the mother candle and the inside bar. If the mother candle is very large, you should not enter, because a pullback is possible. Try not to trade in flat signals. There should be at least some movement before the setup appears.
If you trade intraday, open positions only during the London and American session. If the inside bar is a doji or pin bar, you should not get involved in such a setup, as nothing good will come out of it.
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bit.ly/3spSQqC
🔻FREE Telegram channel🔻
t.me/DeGRAMChannel
🔻Contact for Paid SIGNALS🔻
t.me/DeGRAMForex