An Inside Bar Is two Candlestick, the first one is called the mother candle, it is big and large, and the second one is smaller and is located inside of the Mother Bar.
What Is an Inside Bar Candlestick Pattern?
Inside the bar at tops and at the bottom, as we can see, the second small bar is completely contained by the first one which is the opposite of the engulfing bar pattern. It is also seen as a reversal pattern, coz it indicates that the market trend is likely to change especially when it is located at the top or bottom. Continuation Signal in a strong trending market and in a bull market represents a bullish continuation signal about 52% of the time and a bullish abandoned baby as we called it, is considered a bullish reversal pattern 70% of the time in a bull market and 55% in a bear market.
The Psychology behind the pattern formation;
Indicate a period of Consolidation, In the case of a bullish trend, it reflects that the bulls are not Buying any further on the second day, it is represented by a small black Candle on the second day, after a strong uptrend. And in the case of a bearish trend, it means that sellers are not in control of the market anymore, it is reflected by a small black candle after a strong downtrend.
How to trade the Inside Bar Candlestick pattern?
Inside Bar can be traded successfully in trending markets. The formation of this price pattern provides you with a great opportunity to join the big move. You have identified a strong trend and wait for the formation of an inside bar in line with the direction of the market.The formation of this pattern indicate that the market pauses before its making the next big move; this will allow you to enter the market at the right time and make big profits.
How To Trade the Inside Bar Breakout With Support or Resistance
If Sellers overcome buyers, they will push the price below the support level. Some buyers will feel afraid to lose money because they see that the support level is broken, so they will get out and sell the market again to cover the Loss. Other participants will notice that sellers are in control of the Market, they will decide to sell the market and help the bears push the price down.
As a trader, if you have enough knowledge about support and resistance levels, when you open your chart, you will notice that the support level is broken, and the bears are in control of the market, this is a good selling opportunity, right? But the question is, what is the right time to enter the market?
Inside Bar is the most reliable price action signal that will give you the right time to enter the market and make a big profit.
Tips on Trading the Inside Bar Price Action Setups
- Trade the bigger time frame. Stick with trading signals in bigger time frames such as the daily and 4-hour time frames. Trading these setups on a lower time frame will increase your chance to overtrade the market and take low probability price action signals. If you follow bigger time Frames, this will allow you to set and forget your trade instead of being emotionally controlled by the market.
- Trade the dominant Trend
One should start trading Inside Bars in line with the direction of the market, especially in a strong bullish or bearish trend, but don’t ever try to trade it against the trend if you are a newbie. When you feel like you have mastered trading this pattern with the trend, you can move to trade range-bound market and Counter trends.
- Trade only from key levels
Remember that not all Inside bars are worth trading your hard-earned money; there are specific locations where this setup works great, so make sure that your signal is located at a key level in the market.
- Find Different Factors of Confluence
Trading with confluence means combining different signals to make the best trading decision.
How to Trade a false breakout of the Inside Bar Candlestick Pattern?
Bank & Financial markets know how we trade the market, they know how we think and where we put our stop losses and targets, this is the reason they could easily make money from us. One of the most famous strategies that big players use to take money from novice traders is called stop loss hunting strategy.
This Strategy consists of driving prices to a certain level where there are massive stop-loss orders and the purpose is to create liquidity, because without liquidity the market will not move. Once stop losses are hunted, the market goes strongly in the predicted direction.
The interaction between big participants and novice traders creates a repetitive pattern in the market, one of the most important candlestick patterns that illustrates how big financial institutions manipulate the market is the inside bar and false breakout pattern.
This price action signal is formed when the price breaks the inside bar pattern and then quickly reverses to close within the range of the mother bar.
Inside Bar False Breakout Trading Examples
Support and Resistance level, and Supply and demand areas.
Fibonacci Retracement levels, particularly, the 50% and 61% retracement levels.
21 moving averages and trend lines in trending markets.
Horizontal levels in range Bound Market.
Trading Inside Bar False breakout with Fibonacci retracement
What you have to know is that in an uptrend or a downtrend, the market creates impulsive moves and pullback. The Best Fibonacci retracement levels that we should use are 50% and 61% levels. In my experience, these levels are the most important pullback level in the market. If the pullback reaches 50% or 61% levels, we just need a price action signal to confirm our entry. Fibonacci tools can be used to trade pin bars and the engulfing bar setups. The benefit of trading the false breakout of the inside bar candlestick pattern.
If you master this pattern, this will allow you to stay away from trapped traders and enter the market when novice traders have to get out with loss.
Money Management Strategies
Now you have the strategies, you know how to analyze the market, you know when to buy and when to sell and when to exit, You also know when to stay away from the Market.