A candle whose entire range (high to low) is contained within the previous candle's range — a sign of consolidation and pending breakout.
An inside bar is a candle with a HIGH lower than the previous candle's high AND a LOW higher than the previous candle's low. The whole range is "inside" the prior candle. It signals consolidation — neither buyers nor sellers had enough conviction to break the prior range. That coiled energy usually releases as a breakout in one direction or the other.
Inside bars are popular with swing traders because they offer clear entries and tight stops. Buy on a break of the inside bar's HIGH (with a stop below its LOW), or sell on a break of its LOW (with a stop above its HIGH). The risk is small relative to the potential move because you're trading the breakout of a small range.
Inside bars at major support or resistance are especially powerful. The market is coiling at a key level — when it breaks, it usually breaks hard.
EUR/USD printed three consecutive inside bars on the daily chart in November 2024 right before the US election. The break to the downside delivered a 350-pip move in five sessions.
Frequently asked about inside bar
What is an inside bar in trading?+
A candle whose entire range (high to low) is contained within the previous candle's range — a sign of consolidation and pending breakout.
When will I see inside bar used in real trading?+
Frequently on daily charts at the end of strong trending days, at key support/resistance, and before major news events when the market goes quiet.
What is the most common mistake traders make with inside bar?+
Trading every inside bar as if it's a setup. Inside bars in the middle of nowhere are noise. They only mean something at key levels or after strong directional moves.
What do experienced traders know about inside bar that beginners don't?+
Multiple inside bars in a row ("inside-inside-inside bar") signal extreme compression. When that finally breaks, the move is usually outsized. Mark these on your daily chart and wait.
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