The Inside Bar is one of the strongest patterns in Price Action Trading, and it is extremely versatile because the Inside Bar setup can both reverse and continue a trend. Today I will share with you more in-depth about the Inside Bar pattern and some important notes when trading with it, to avoid the case of detecting the wrong pattern, or finding the right pattern but still losing money.

What is the Inside Bar?

The Inside Bar pattern consists of 2 candles: a mother bar stands in front of it and covers ALL of the candles behind it. The candle behind it is the Inside Bar candle.

Inside Bar candles may be located in the center of the mother bar, or close to the closing or opening price of the mother bar, but must be ENTIRE in the mother bar, from highest to lowest. That is the prerequisite to forming an inside bar. In terms of color, a typical inside bar should have two opposite candles, but if the color is the same, it's okay (because Price Action patterns rarely distinguish colors).

Inside Bar showed a slowdown, confusion, and accumulation of the market. Note that it is only for a slowdown, not a reversal.

Inside Bar - Variants of the Inside Bar

The Inside Bar comes in many variations, and each has a different level of effectiveness:

1. Double (multi) Inside Bar

The Double Inside Bar consists of 2 Inside Bar candles that fit neatly in the structure of the mother bar candle. These candles appear quite often and sometimes you see 3.4 or more inside bars in the same mother bar. Follow all the articles ‘What I trade today,’ you will see this.

Multi-candlestick Inside Bar shows a prolonged accumulation of the market and is often followed by a strong blow to take prices away. But where to go is not clear.

2. Coiling Inside Bar

Coiling Inside Bar occurs when 2 or more inside bars are interlocking one after another, that is, each candle is completely surrounded by the previous candle from top to bottom. This is a stronger pattern than the Inside Bar, as it shows a very steady and beautiful accumulation that will ultimately lead to a strong explosion that takes prices away.

3. Fakey - Inside Bar false breakout

Fakey is an important Inside Bar pattern and exhibits a stronger price rejection than the Inside Bar, so it can be used for a better entry into reversal orders.

Fakey is inside the bar and has a false breakout. That is when the price breaks out of the original inside bar in one direction but quickly turns in the opposite direction, trapping traders who enter in that direction. It is a price rejection, and after Fakey appears, usually the price will break against the previous trend.

4. Inside Bar-pin bar combo

When you see a pin bar surrounded entirely by a mother bar behind, it is the Inside Bar pattern - the pin bar combo (both the pin bar, and the inside bar). This is also a strong price action reversal pattern because the Inside Bar shows the market is accumulating and is itself a pin bar that shows price rejection.

Inside Bar - How to trade the Inside Bar

There are two ways to trade when meeting an Inside Bar: either setup continues trend or setup trend reversal.

In most cases, the Inside Bar will act as a trend continuation pattern, especially during strong trends. However, the Inside Bar is quite possible with a reversal setup at important support resistance areas. Let's look at a few examples:

1. The Inside Bar is a continuation pattern:

The Setup Inside Bar as a continuation pattern is the preferred setup of many Price Action traders, for its simplicity and trend following. Inside Bar can be used to fill trend following orders to make big profits:

In the above example, we can place sell stop orders at the bottom of the inside bar with the stop loss a few pips away from the top of the inside bar.

Tip: Avoid the inside bar trading going on at important price zones, as false breakouts or reversals occur in these areas.

2. The Inside Bar is a reversal pattern:

It is important that when you want to trade the inside bar with the expectation of a reversal, you must make sure that it appears in an important price zone, which has bounced back many times before:

Trade Inside Bar with a reversed setup requires experience and time to trade with a familiar market.

Inside Bar - Some notes when trading Inside Bar

Brothers should note the following points:

  • Nested Inside Bar, Fakey, Inside Bar - pin bar combo is stronger reversal patterns than Inside Bar;
  • Avoid trading inside bars that have large and long mother candles or inside bars, and contain lots of inside bars, which are unpredictable and easy to lose.
  • Should only the Inside Bar trade reverses at important prices, so the Inside Bar trade continues at less important price zones.
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