What is an Inside Bar?

Understanding Inside Bars

An inside bar is a candlestick pattern where the current candle's entire range—both its high and low—falls completely within the range of the previous candle. The previous candle is called the "mother bar" or "outside bar." Inside bars signal consolidation, indecision, or a pause in momentum, and they frequently precede explosive breakouts in either direction as the market resolves the compression.

The pattern reflects a contraction in volatility and trading range. After a strong directional move represented by the mother bar, participants pause to digest the move, take profits, or wait for additional information. This creates a tight range that builds coiled energy, similar to a spring being compressed. When price eventually breaks out of the inside bar's range, it often does so with conviction and follow-through.

Identifying Inside Bars

To qualify as a valid inside bar:

• High constraint: The inside bar's high must be lower than the mother bar's high
• Low constraint: The inside bar's low must be higher than the mother bar's low
• Clean formation: The entire candle body and wicks stay within the mother bar's range
• Context matters: Most reliable when forming at key support/resistance levels or after strong trends

Inside bars can appear on any timeframe, but they carry more significance on higher timeframes like daily and four-hour charts. Multiple consecutive inside bars (inside bar followed by another inside bar) create even tighter compression and can produce more powerful breakouts.

Breakout Trading Strategies

The classic approach is to trade the breakout when price decisively moves beyond the mother bar's high or low. Entry techniques include:

• Aggressive entry: Enter immediately on the break of the mother bar's high or low
• Conservative entry: Wait for a candle to close beyond the mother bar's range to confirm the breakout
• Pullback entry: Enter on a retest of the broken level after initial breakout, which offers better risk-reward

Place stop-loss orders on the opposite side of the mother bar's range. For a bullish breakout above the mother bar high, place stops below the mother bar low, and vice versa. Targets can be set based on measured moves (projecting the mother bar's range), nearby support/resistance, or trailing stops to capture extended runs.

Multiple Timeframe Analysis

Inside bars become even more powerful when aligned across multiple timeframes. For example, if you spot an inside bar on the daily chart that coincides with consolidation on the four-hour chart near a weekly support level, you've identified convergence of three timeframes—a high-probability setup. Always check the higher timeframe context to ensure the inside bar aligns with the broader market structure rather than trading against the dominant trend.

Fakeout Strategy (Advanced)

Experienced traders sometimes fade false breakouts rather than trading with them. If price briefly breaks the mother bar's high or low but quickly snaps back inside the range within one or two candles, it signals a failed breakout (stop hunt). Aggressive traders can enter in the opposite direction, targeting the other side of the inside bar's range. This strategy requires tight stop-losses just beyond the false breakout point and works best in range-bound or choppy markets where breakouts frequently fail.

Failure Patterns to Recognize

Not all inside bar breakouts succeed. Failed inside bars occur when price breaks one direction but lacks follow-through, quickly reversing back through the range and breaking out the opposite side. These failures often happen when the broader market context doesn't support the initial breakout direction, or when the inside bar forms in isolation without confluence from other technical factors. Recognizing failure early and cutting losses quickly is essential to inside bar trading success.