How to Trade the Inside Bar Pattern (2024)

The inside bar candle pattern is one of the most frequently occurring chart patterns in financial markets. It is called an inside bar because the first candle completely covers the second candle, which is a chart formation that helps traders predict the next price movement.


  • The inside bar candlestick is a prevalent chart pattern signaling potential market shifts.
  • Always weigh the tangible benefits against challenges when diving into inside bar trading.
  • Before engaging in inside bar trading, be aware of both its promising rewards and potential pitfalls.

In this guide, we’ll talk about an inside bar candlestick chart pattern and how you can trade with it.

How to Trade the Inside Bar Pattern (1) Table of Contents

  • What is the inside bar candlestick pattern?
  • How to identify and use the inside bar candle pattern in forex trading?
  • Inside bar pattern trading strategies and examples
  • The inside bar pattern – Pros and cons
  • Key takeaways
  • Frequently asked questions (FAQs)

What is the Inside Bar Pattern?

The inside bar is a two-candlestick pattern that signals trend continuation or reversal. The first candle of the pattern is usually large, called the mother candle, while the next candle is a small candle having low wicks, and is called the baby candle. In another case, when the mother bar does not appear, it’s also called the abandoned baby candle pattern.

How to Trade the Inside Bar Pattern (2)

The concept behind the inside bar pattern is that there is a temporary consolidation when the inside bars are formed or a decline in buying or selling pressure in the market following a large and significant price movement. Now, the inside bar setup may appear on both sides – meaning, when the pattern appears in an uptrend, it’s called a bullish inside bar pattern, while when it appears in a downtrend, it is called a bearish inside bar pattern.

Moreover, the pattern could be either a trend reversal or continuation chart pattern, depending on the context of the markets. It is also one of the most frequently seen patterns that appear regularly in any market condition. So, as you can assume, there’s no one version of the inside bar pattern.

Even though the pattern is known as having a structure with one large bullish or bearish first candle and a second smaller candle, it could have many other chart formations. For example, the inside bar pattern could also be formed with a large first candle and a second tiny Doji candle. Technically, as long as the first candle covers the second candle, then it’s an inside bar pattern.

In structure, the inside bar is similar to the inside day candle pattern with the only difference that inside day is used on a daily chart time frame while the inside bar candle pattern is used for intraday trading. Furthermore, occasionally it may appear inside another chart pattern formation, such as the three inside-up patterns when the first two candles are in fact inside bars.

How to Identify the Inside Bar Candlestick Chart Pattern in Trading?

As mentioned above, the inside bar is a two-candlestick pattern that may appear in any market scenario. Identifying the inside bar is not rocket science, and once you have a basic understanding of what it looks like, you will be able to locate it instantly on price charts. You just need to remember a few rules to identify the pattern correctly.

The first candle has a tall body, sometimes very large wicks, and is called the mother bar. The second candle has a small body, sometimes having low wicks, and is called the baby candle. The inside bar formation is completed when the second candle closes within the body of the mother candle.

Generally, although the inside bar is a two-candle pattern, the next candle after the second is a crucial one. As a matter of fact, the trade will be taken once the third candle is over.

So, let’s see an example first.

How to Trade the Inside Bar Pattern (3)

On the GBP/USD chart above, you can see a bullish inside bar. As discussed earlier, as long as the first candle covers the first candle, it is an inside bar pattern. Note how the price continues to trade higher after the appearance of the inside bar pattern and the confirmation of the third candlestick’s formation.

With the above in mind, here are a few steps to help you identify and trade the inside bar pattern:

  1. Identify the mother and the baby candles in an uptrend or downtrend.
  2. Make sure the baby candle closes within the mother candle.
  3. Wait for the next candle to close and indicate the next price movement.
  4. Add other technical analysis tools such as Fibonacci retracements, MACD, RSI, and moving averages
  5. Enter long or short positions after the formation of the pattern.

Inside Bar Chart Pattern Trading Strategies and Examples

You can apply plenty of trading strategies when trading inside bars. As mentioned, the inside bar candle pattern can appear in a downtrend or an uptrend and indicate a reversal or trend continuation.

So, you cannot trade every single inside bar the same, as you may not know if the trend will reverse or continue. Instead, it would be best to interpret the pattern differently on the market scenario and decide the next price direction. Still, the inside bar allows you to identify a pause in price action and a good market entry level before the next price movement. That’s what this pattern is all about.

So, a good solution is to apply an indicator or a tool that works well with the inside bar. For that matter, you can use support and resistance levels, a Fibonacci retracement tool, MACD, RSI, and MAs.

Below, we will show you two market examples to trade the inside bar pattern – range and breakout trading strategies.

1. Range Trading

The first way to trade the inside bar pattern is in a ranging market. After all, the second candle indicates a slowing buying or selling pressure following a large candle, which sometimes signals the beginning of an inside bar consolidation range in the market, or the market has found a new market equilibrium.

We added the Relative Strength Index (RSI) indicator as our confluence trading tool to see if the price continues with the trend, reverses, or stays in range mode.

The chart below shows that the inside bar candle pattern immediately appears following a sharp downward move. Then, a large bullish candle appears, followed by a bearish candle within the first candle’s body.

How to Trade the Inside Bar Pattern (4)

As you can see, when the inside bar pattern appears, the RSI stands at around 40-45, a level indicating indecision and the market and, thus, the likelihood of consolidation.

In this case, you will enter a trade intending to capture small price movements inside a range area, hence, support and resistance levels.

2. Breakout Trading

The second way to trade the inside bar pattern is the inside bar breakout trading method, which many believe is slightly more exciting to trade. This time, we identified the inside bar formation with a very large bullish candle followed by a smaller bearish candle covered by the first candlestick.

The critical point here is the third candlestick that rises above the second candle and indicates that the price is likely to increase. To confirm that, we used a basic moving average indicator, and, as seen in the chart, the crossover occurs precisely at the formation of the mother candle (the first candle).

How to Trade the Inside Bar Pattern (5)

So, a buying signal is given once the third candle closes above the previous bar. Additionally, the volume provides another confirmation that buying pressure is building up.

As for stop loss, an order could be placed at the lowest price level of the mother candle or at the lowest level of the previous price swing (as shown in the chart). Finally, take profit is placed at the highest level of the last swing price.

The Inside Bar Candlestick Pattern – Pros and Cons

No pattern is the holy grail of trading, and the inside bar pattern, like many other classical chart patterns, has strengths and weaknesses. So let’s see what these are.


  • Inside bar patterns frequently appear in the markets
  • You can identify the pattern easily
  • The inside bar can be used as a trend reversal and continuation signal
  • The profitable inside bar setup pattern enables you to find many trading opportunities, especially for intraday trading techniques


  • Signals from the inside bar pattern can be pretty confusing as it is unclear where the market is heading
  • The pattern must be combined with other tools
  • Traders that trade the inside bar pattern must interpret and analyze the market’s sentiment

Key Takeaways

In a nutshell, here are the main takeaways from identifying and trading the inside bar chart pattern.

How to Trade the Inside Bar Pattern (6) Key Takeaways

  1. The inside bar is a multiple inside bars chart pattern, providing a short pause in price action
  2. Depending on market conditions, the inside bar pattern can be a trend reversal or continuation pattern
  3. The pattern consists of a mother candle and a baby candle. Though it is a two-candle pattern, the third candle indicates the market’s direction
  4. To use the pattern correctly, it is best to add indicators or tools like support, resistance, moving averages, RSI, and Fibonacci

Frequently Asked Questions (FAQs)

Here are the most frequently asked questions about the inside bar candlestick pattern:

Is the inside bar a good trading strategy?

Yes, it is. When combined with other tools or indicators, trading with the inside bar provides an excellent and straightforward smart trade management strategy. Although it is not a decisive chart pattern like many other chart patterns, it certainly enables traders to find many trading opportunities.

What is the best time frame for trading the inside bar candle pattern?

Generally, the longer the time frame, the better the signals the inside bar pattern provides. However, the pattern is certainly more suitable for short-term trading techniques. If you are a scalper, you can use the inside bar in a 15-minute timeframe or lower.

Using this forex trading strategy, you look for the inside bar in an uptrend or downtrend, wait for the pattern to fully appear, and double-check the price action through an indicator or support/resistance levels. After that pause in price action, you can find an inside bar trade.

Is the Inside bar candle pattern bullish or bearish?

The inside bar pattern can be bullish, bearish, or neutral. It is one of the few chart patterns that does not necessarily signal a directional change. Instead, it provides a price pause before the next price movement.

How to Trade the Inside Bar Pattern (2024)


How do you trade inside bar patterns? ›

How to trade with the Inside Bar pattern
  1. Identify potential breakout level. ...
  2. Consider trading with medium-term charts. ...
  3. Open a position based on Inside Bar levels. ...
  4. Place a stop-loss order.

Is inside bar trading profitable? ›

There's no doubt that inside bars can be a profitable way to trade the Forex market, equity, commodity or any other market. After all, it's a setup that it teaches as part of the price action course and one that has served extremely well.

What is the win rate for inside bar strategy? ›

Control Benchmark - Inside Bar

Within our back-testing period, the winning percentage of inside bars is 37.33% in a sample size of 4107.

How to trade inside a candle pattern? ›

When you notice an Inside Candle on the price chart, you should mark the high and low of the Inside Bar consolidation range. Both the levels are used as a trigger of a potential trade as there is a high possibility of continuation outside the range in the direction the breakout.

Is inside bar bearish or bullish? ›

An inside bar can be either bullish or bearish, depending on its context within the price action. If it forms within a downtrend, it can be considered bearish, indicating potential continuation. If it forms within an uptrend, it can be seen as bullish, suggesting a potential continuation of the upward trend.

What is inside bar trading strategy Tradingview? ›

The InSide Bar Strategy is a candlestick pattern used to time entries with low risk. It can be used to follow and trade with a trend or show reversals within the market through its candles.

How to spot an inside bar? ›

Identifying the Inside Bar on Trading Charts

Compare the high and low range: Check if the high and low range of the subsequent candle is entirely contained within the high and low range of the preceding candlestick.

What is the 15 min inside bar strategy? ›

If you are a scalper, you can use the inside bar in a 15-minute timeframe or lower. Using this forex trading strategy, you look for the inside bar in an uptrend or downtrend, wait for the pattern to fully appear, and double-check the price action through an indicator or support/resistance levels.

What is the inside candle rule? ›

The inside bar candle pattern is NOT telling traders that the market is bidding price higher or lower but rather that the market is waiting before making the next big move in the asset. This means potential opportunities for traders.

What is the NR7 inside bar strategy? ›

Refining NR7 Strategy with Inside Bar Theory:

The inside bar strategy is a price action strategy and is also based on the same theory of expansion and contraction but here the expansion and contractions are defined based on different rules. So, the probability of winning automatically improves.

How can I improve my win rate? ›

How to Increase Your Win Rate
  1. Improving your win rate. Several factors can hurt your win rate, even with the best sales people on your team. ...
  2. Tip 1: Nuture your leads throughout the funnel. ...
  3. Tip 2: Align the sales process with customer's buying path. ...
  4. Tip 3: Foster relationships with customers.

What is an acceptable win rate? ›

Defining a good win rate depends on your company, niche market, and product. However, a rate of over 60% is considered a strong indicator that you have efficient and effective sales strategies. Some industries might have lower success rate expectations because of the size and complexity of the target market.

What is the 3 candle rule in trading? ›

It consists of three successive candlesticks – the first is long and bearish and is followed by a smaller bullish bar that is completely engulfed by the first one. The third candle is bullish and closes above the second candle's high, suggesting a potential shift from a downtrend to an uptrend.

What is a 3 week tight close strategy? ›

Three-Weeks-Tight Vs. Short Stroke. The three-weeks-tight pattern forms when a stock closes within 1.5% of the prior week's close for two straight weeks. Volume will be quiet during this period as the stock consolidates after breaking out of its base.

What is the inside bar false breakout strategy? ›

The Fakey Pattern (Inside Bar False Break Out)

When price initially breaks out from the inside bar pattern but then quickly reverses, creating a false-break, and closes back within the range of the mother bar or inside bar, we have a fakey pattern. So, think of it like this: Inside Bar + False-Breakout = Fakey pattern.

How to trade inside and outside bar? ›

Determine the Direction: For Inside Bars, consider entering a position in the direction of the breakout. For Outside Bars, look to trade in the direction of the bar's closing. Set Stop Losses and Take Profits: Use the previous bar's high and low as a benchmark for setting stop losses.

How do you use bar charts in trading? ›

A bar chart visually depicts the opening, high, low, and closing prices of an asset or security over a specified period of time. The vertical line on a price bar represents the high and low prices for the period. The left and right horizontal lines on each price bar represent the opening and closing prices.

What is an inside day bar in trading? ›

Inside days occur when candlestick patterns form on a given day within the bounds of the previous day's high and low. The inside pattern indicates a smaller trading range than the previous day. Often signaling some consolidation, a series of inside days can indicate an imminent trend reversal in technical analysis.

How to trade double inside bar? ›

A common approach to trading the Double Inside Bar breakout uses stop orders. Precisely, place stop orders around the parent bar. The high of the parent candlestick is the buy stop order level. Correspondingly, the low of the parent bar is the sell stop order level.

Top Articles
Latest Posts
Article information

Author: Mrs. Angelic Larkin

Last Updated:

Views: 6236

Rating: 4.7 / 5 (47 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Mrs. Angelic Larkin

Birthday: 1992-06-28

Address: Apt. 413 8275 Mueller Overpass, South Magnolia, IA 99527-6023

Phone: +6824704719725

Job: District Real-Estate Facilitator

Hobby: Letterboxing, Vacation, Poi, Homebrewing, Mountain biking, Slacklining, Cabaret

Introduction: My name is Mrs. Angelic Larkin, I am a cute, charming, funny, determined, inexpensive, joyous, cheerful person who loves writing and wants to share my knowledge and understanding with you.