Technical Analysis
Inside Bar
A two-candle pattern where the second candle is completely contained within the range of the first — signals consolidation and a potential continuation or reversal breakout.
Key rules
- Second candle high must be below mother bar high, low above mother bar low
- Mother bar should be a strong, decisive candle to give context
- Most reliable when appearing at key S/R levels
- Trade the breakout of the mother bar in the direction of the prior trend
- Stop goes beyond the opposite end of the mother bar
An inside bar forms when the second candle's high is lower than the first candle's high AND the second candle's low is higher than the first candle's low. The second bar is entirely "inside" the range of the first (the "mother" bar).
**What It Signals** Inside bars represent consolidation and indecision after a decisive move. Market participants are unwilling to push price further in either direction. The breakout direction typically reveals the next leg of the move.
**Continuation vs Reversal** - After a strong trend, inside bars most often resolve as continuations - At key turning points (major S/R, swing highs/lows), they can signal reversals
**Entry Methods** - Aggressive: enter on a close above/below the mother bar - Conservative: enter on a breakout with a buffer (e.g., a few pips/cents beyond the mother bar high/low) - Stop loss goes below/above the opposite end of the mother bar