Inside Bar
Tue, Apr 15An Inside Bar forms during a significant downtrend when its trading range is entirely contained within the high and low of the preceding bar. This indicates that the balance of power between buyers and sellers is becoming more equal. The bearish pressure may be diminishing while bullish pressure could be on the rise.
What does an Inside Bar look like? An Inside Bar must remain entirely within the range of the bar that comes before it. This means that the second bar should have a lower high and a higher low compared to the first bar.
What does an Inside Bar mean? An Inside Bar may indicate that the price action, which has recently been dominated by sellers, is starting to weaken. With reduced price volatility and the price remaining within the range of the previous bar, it suggests that buying pressure has increased or selling pressure has decreased. This "pause" in price action does not necessarily indicate clear strength from either buyers or sellers. Sellers might be nearing exhaustion, leading to a potential price increase, or they could simply be taking a momentary break before pushing the price lower (resulting in a lower low).
How to trade an Inside Bar? Set stop orders to capitalize on a breakout in either direction: a buy stop order above its high and a sell stop order below its low. Once one of the orders is activated, cancel the other. Alternatively, place only one order (either buy or sell) in the direction of the primary trend, maintaining the structure as much as possible.
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