Trading the Inside Bar Strategy in Forex

Inside Bar Forex Trading Entry

This article will discuss the Inside bar trading strategy , a trading method I have used successfully for most of my trading career. My trading involves all methods pertaining to price action, they are not used in conjunction with indicators or other systems. I use a plain vanilla price charts tp look for the inside bar and other patterns as they form naturally on 240 minute and daily price charts.
What is an inside bar ?
An inside bar is a bar or series of bars which is/are completely within the range of the preceding bar, or , i.e. it has a higher low and lower high than the bar immediately before it (some traders use a more lenient definition of inside bars to include equal bars). On a smaller time frame it will look like a triangle.
What Does it mean?
An inside bar indicates a time of indecision or consolidation. Inside bars often occur at tops and bottoms, in continuation flags, and at key decision points like major support/resistance levels and consolidation breakouts. They often provide a low-risk place to enter a trade or a logical exit point.
When to use the signal
The most logical time to use an inside bar is when a strong trend is in progress or the market has clearly been moving in one direction and then decides to pause for a short time. If we play the break out, our stop loss can be defined by placing it below the half way point of the outside bar or mother candle, or for the more conservative trader, below the outside bar itself. This would mean that the market muse break a 3 bar low to take us out of the trade.
These inside bars are very good when trading a trend on the 240 minute charts and the daily charts.
Special Notes
More advanced traders may also identify market turning points when trading against the trend, but this wil take plenty of screen time to learn, so its not suggested for novice traders.
The Inside bar forex strategy is a flashing light, a major signal to the trader that reversal or continuation is about to occur.
See the example below for a classic inside bar break out, and a classic inside bar stall pattern.