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Inside Bar

A candle fully inside the prior candle’s high/low. Signals compression and often precedes expansion; trade the break with context.

NeutralContinuationMedium reliability
compressionbreakoutrangecontinuation

Definition

  • Two-candle structure: the “inside” candle’s high is below the prior high and its low is above the prior low.
  • Inside candle range is smaller (compression).

Market Psychology

  • Market pauses and consolidates.
  • Stops build above/below the “mother bar.”
  • Breakout often triggers a directional move, especially with trend alignment.

Rules

  • Best in a trending market (continuation).
  • Use mother bar high/low as breakout trigger levels.
  • Prefer multiple inside bars (tighter compression) before expansion.

Best Context

  • Trend continuation setups.
  • After impulsive move then pause (flag-like behavior).
  • Near key moving averages in trend.

Confirmation Ideas

  • Break and close beyond mother bar level in trend direction.
  • Retest of breakout level holds.
  • Volume expansion on breakout candle.

Invalidations

  • Breakout fails and closes back inside the mother bar.
  • Immediate break in the opposite direction after entry.

Common Mistakes

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