Inside bar breakout
A candle inside the previous candle’s range marks a pause. The break shows the next direction.
What it is
An inside bar has a high lower than the previous (mother) candle’s high and a low higher than its low. Volatility contracts, then usually expands. The breakout of the mother bar’s range gives a clear trigger and a clear stop.
Inside bars work best in the direction of the higher-timeframe trend and near a level. In a tight range they produce many false breaks.
How to use it
- Identify the mother bar and the inside bar(s).
- Mark the mother bar high and low.
- Enter on a close beyond the high (long) or low (short) in the direction of the trend.
- Stop on the other side of the mother bar, or at the midpoint for a tighter plan.
Common mistakes
- Entering both sides at once.
- Trading inside bars when the mother bar is huge (the stop is too far).
- Ignoring that two or more inside bars in a row make a tighter, stronger coil.
Practise it in TradeDesk X
Bollinger bands and the Supertrend layer on the TradeDesk X chart show the same compression-then-expansion behaviour on a larger scale.
Related lessons
Range trading
When price moves sideways, buy near the bottom and sell near the top. Step aside when it breaks.
📊Bollinger bands
A moving average with bands two standard deviations away. They show volatility cycles.