Inside Bar Candle: Explore Bullish & Bearish Pattern Inside Candle

Trading becomes easy when you have the right knowledge of technical analysis and chart patterns. Chart patterns like the inside bar guide you toward understanding future price movement and trend continuation. Whether you’re trading forex, stocks, indices, or crypto, mastering candlestick patterns gives you a clear edge.

The more knowledge of candlesticks you have, the more trading opportunities you can discover. Today, in Beirman Capital’s series on candlestick patterns, we will study the Inside Bar Candle Strategy also known as the inside bar candlestick pattern and how to use it effectively in your trading plan. Let’s start with a quick introduction.

What is an Inside Bar?

An inside bar is a technical analysis pattern that forms when the second candle (the inside bar candle) forms entirely inside the range of the first candle, called the mother bar. It’s also referred to as the inside candle or inside day in trading. The pattern often appears during a period of consolidation and is completed by a breakout, suggesting that the price may move in the direction of that breakout. Traders using inside bar strategy often monitor such setups using inside bar indicator MT4 tools, or even automated trading scripts for inside bars.

Key Components of the Inside Bar Pattern

The inside bar pattern is made of two candles, each carrying a distinct significance:

Mother Candle (Mother Bar): This is a long candle that defines the range. It often marks a pause in price action and is a potential setup for a bar reversal or breakout.

Inside Bar Candle: The second candle is completely within the high and low of the mother candle. Also called an inside of bar or inside day candle, it signals consolidation. These are also known as bar options in trading bars terminology, or inside of a bar. Some traders may even refer to this as inside the bar or simply inside candle pattern.

Other synonymous terms include bar on the inside, trading bar, or barstick when referring to visual candlestick insights.

Is the Inside Bar Bullish or Bearish?

An inside bar can be bullish or bearish, depending on the trend and candle colors.

Bullish Inside Bar

A bullish inside bar appears during an uptrend. The mother bar is typically long and bearish (red/black), followed by a small bullish candle (green/white) within its range. A breakout above the inside candle signals a long position. This pattern is also referred to as a bullish inside candle or bullish inside bar.

Bearish Inside Bar

A bearish inside bar appears in a downtrend. The mother candle is long and bullish, and the inside bar is bearish, forming entirely inside the first candle. A breakout below the inside bar indicates a short opportunity. This pattern is also labeled as a bearish inside candle or bearish inside bar.

How to Trade the Inside Bar Candle Pattern

Here’s a step-by-step guide for trading the inside bar strategy:

1. Look for the Pattern

Use charting tools or an inside bar screener to spot the two-candle formation. You can also automate this with inside bar indicator MT4 or use trading scripts for inside bars for platforms like MT4/MT5.

2. Wait for the Breakout

This is the essence of the inside bar breakout approach. Wait for the price to break above or below the inside bar’s range. This is the key to trading inside day trading setups, often used by traders using tools like barlogic.

3. Confirm the Pattern

Check for declining volume at formation and rising volume at breakout. Support your analysis with indicators such as moving averages, volume oscillators, or confirm with patterns like doji, hammer, or even synonym reversal patterns.

4. Place the Trade

• Once the breakout is confirmed:
• Enter a long position if the price breaks above the inside candle.
• Enter a short position if it breaks below.

Set your stop loss and take profit using a risk-reward ratio. You can also try double inside bar strategies or double inside structures for more advanced setups.

When is the Inside Bar Trade Worthy?

Not all inside bars are created equal. Here’s when you should consider trading them:

Inside Bar

Clear Formation: The inside bar should be fully within the body of the mother bar. If even a part falls outside, it’s invalid.

Strong Trend: The inside bar pattern is more effective when the market shows a strong bullish or bearish trend.

Avoid High Volatility: Patterns like the inside bar are prone to false signals in choppy markets or during high volatility.

Breakout Candle Matters: A strong breakout candle long, without wicks is a high-conviction signal.

Support and Resistance: Look for inside bar setups near significant support or resistance zones. You can confirm this using bar logic or bar stick indicators.

Limitations of the Inside Bar Strategy

Despite its popularity, the inside bar trading strategy has some limitations:

Not Ideal for Short Timeframes: It’s more effective on higher timeframes (Daily, Weekly, Monthly). On lower timeframes like 5M, 15M, 1H, or 4H, the pattern may not be reliable for short-term traders.

False Signals: Without proper confirmation, inside bar patterns can lead to fake breakouts.

Limited Information: The pattern alone doesn’t offer precise entry/exit signals.

Bottom Line

The inside bar candlestick strategy is a well-known method for identifying price breakouts in forex, stock market, indices, commodities, and even crypto. It is visually easy to spot, versatile across timeframes, and frequently appears across trading charts. Platforms like Hi Bar Capital also utilize these formations for analysis in the bar stock market context.

However, success in inside bar trading lies in confirmation, trend context, and market conditions. To master it, we recommend starting with our Inside Bar Candle Strategy guidance or test it on a demo account through Beirman Capital’s platform. If you're wondering what does it mean if a stock chart is red, it typically signifies bearish pressure, which can help when analyzing the color of the mother bar.

FAQ

What does the inside bar candle mean?

It’s a candlestick inside day pattern where the second candle forms completely within the previous one’s range. It typically suggests trend continuation.

Is an inside candle bullish or bearish?

It can be both. It is bullish when the second candle is green or white and bearish when it’s red or black.

Is the inside bar a good strategy?

Yes, the inside bar is a solid pattern, effective across multiple timeframes and confirmed by a variety of indicators.

What is the best inside bar trading strategy?

Trading breakouts above or below the inside candle is the most effective and simple strategy.

What is the win rate for the inside bar strategy?

The win rate depends on filters and confirmations but typically ranges between 50% to 60%.