In trading, we recognize various price action patterns. which indirectly indicates where the next price trend is going. This price action pattern is often repetitive. at a time so that traders/investors can use it for decision making.

The inside bar is a type of price action pattern.

What is an inside bar and what does it mean in the world of trading? mark See description below:

What is the inner bar pattern?

The inside bar pattern is a price pattern that consists of two candlesticks. The first large candle is called the mother. while the second smaller candlestick is called an inside bar. The highs and lows of the second candle are neither higher nor lower than the first.

So the size of the second candlestick is smaller but not higher or lower than the first candlestick. Here’s the picture:

Figure 1: Inside bar example (Source: Daily FX)

Inside bar patterns can appear in any time frame. And one parent strip can not only be tracked by one internal stripe. but also multiple tabs at once This pattern also indicates that bulls (buyers) and bears (sellers) are equally strong. Therefore, market conditions are uncertain.unsure). Therefore, it is important for forex traders to know and understand this pattern.

If you still don’t understand Figure 1, you should know. How to read candlestick patterns first.

Type of inner bar pattern

1. Bullish inside bars

The bullish inside consists of three candlesticks arranged as follows:

  1. The first candlestick is a bearish candlestick.
  2. The second candlestick is a bullish candle. but still in the highs and lows of the first candle
  3. The third candle is a bullish candle that can break through the highest price of the first candle.

2. Bearish inside the bar

The components of this form are arranged in reverse. bullish inside bar that is:

  1. The first candle is an uptrend candle.
  2. The second candle is a bearish candle. but still in the highs and lows of the first candle
  3. The third candle is a bearish candle that can break the lowest price (support line) of the first candle.

Both the downtrend and the bullish in the bars are patterns that indicate the potential for a reversal in the price. (Reversal pattern) that will occur

1. Multiple inner strips

Multiple internal bands occur when one parent region is followed by several internal bands at once. This indicates that the market is consolidating without a clear trend direction.

2. Inner roll bar

An inside bar twist can occur if the first and second candles are different colors. (red or green), but the third candle is the same color as the first candle. This pattern indicates that the prices, which were initially still consolidated, are starting to show. new price trend.

3. Fake inner bar

This pattern occurs if the movement of the third candlestick breaks through the high or low of the first candle. And the direction of movement is different from the previous inside bar, so if the second candlestick shows a bullish inside candle. The third candle will actually move downwards. and vice versa

4. Mother bar with pin bar

A pin bar is a candle with a tail longer than the body. This type can appear behind the parent bar and act as a pin bar. As long as the size of the body of the candlestick is within the boundary of the parent bar.

Generally, pin bars indicate a trend reversal. So if there is this candlestick after the mother bar The preceding trend is reversed.

Trading strategy using Inside Bar

1. Wait for a breakout

Generally, the inside bar indicates that the market is experiencing consolidation or uncertainty. Therefore, traders should wait for the breakout that manages to penetrate the highest or lowest price point of the parent bar.

Simply put, a buy signal occurs when the price of the third candle is higher than the price of the first candle. On the other hand, a sell signal occurs when the price of the third candle is lower than the first candle. You can buy it if it happens. real breakout On the support line, it’s just that the corresponding transaction type is short sale and not long

Why wait for a breakout? Because it’s possible that what’s going on is a fake inner tab or multiple inner tabs. as stated above Several internal bars indicate that the consolidation phase will continue for a long time.

2. Confirm with technical indicators

Consolidation market conditions are often difficult to predict. But that doesn’t mean you are silent. You can use additional technical indicators such as Relative Strength IndexADX or moving average divergence convergence (MACD) to define overbought and oversold conditions in the market. so that when there is a signal that a particular team (Bull vs Bear) dominates You will know before the breakout happens.

This means that the breakout acts only as a confirmation of the price action. If you are confident in the results of the analysis You can open a position before the breakout occurs. but if you are not sure You can wait for a breakout first.

Inside Bar Pros and Cons

strength

The first advantage of the inside bar is that this pattern can occur on any timeframe, but in general it is recommended to trade using the inside bar for timeframes over 1 day as they often have “noise” or something. Many signals interfere with the validity when using this pattern for scalping or trading on shorter time frames.

The second advantage is that this pattern is easily identified by new traders due to its simple layout.

defect

The disadvantage of the inside bar pattern is that it can show both a reversal and a continuation pattern at the same time. There are also false inside bars which can trap traders if traders are impatient and observant in making decisions.

due to this defect The inside bar pattern is therefore often only used by traders as it is one of the many trading strategies they develop. You can pair this pattern with the oscillator indicator above, with Fibonacci retracement or with other technical indicators.

Conclusion

Inside bars are price patterns that consist of one large candlestick and one or more smaller candles. The size of the small candle is neither higher nor lower than the previous large candle. This price pattern indicates short-term price consolidation in the market. Therefore, traders should wait for a breakout before opening a position.



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