What it looks like
Two candles. The first (the mother bar) is bigger. The second has a lower high and a higher low than the first, so its whole range, wicks included, fits within the mother bar. On daily charts it is also called an inside day.
What it means
The market has gone quiet and the range is squeezing. Quiet tends to be followed by a move, though the candle does not say which way. The point of the pattern is to mark a small, defined range so that when the move comes you have a clear trigger and a clear place for the stop.
How to trade it
- 1
Mark the high and low of the bigger candle before it (the mother bar).
- 2
Confirmation: a close above the high (buy signal) or below the low (sell signal).
- 3
Entry: at the close of the breakout candle.
- 4
Stop: on the other side of the bigger candle. Example on gold: mother bar from 4,010 to 4,034, inside bar from 4,018 to 4,028. A candle closes at 4,036. Buy at 4,036, stop at 4,008, a 28 point risk.
- 5
Target: the next key level or 2 times the stop.
A close back inside the bigger candle's range after the breakout.
Where it works best
On 1 hour to daily charts, especially before a session open or ahead of scheduled news, when quiet often gives way to a move.
WickSpeak spots every inside bar automatically and names it on the candle that made it. The note says what it is, how to trade the break and the close back inside the bigger candle that proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Guessing the direction before the break.
- Trading inside bars after a huge mother bar, where the stop is too wide.
- Taking every inside bar on 1 minute charts, where they form constantly.
Related patterns
Questions traders ask
Is an inside bar bullish or bearish?
Neither. It is a pause. The close above or below the mother bar decides the direction.
What is a mother bar?
The bigger candle just before the inside bar. Its high and low are the levels to watch for the breakout.
What happens if the break fails?
A close back inside the mother bar proves it wrong. A false break that then closes beyond the other side is called a fakey.
What timeframe is best for inside bars?
The 4 hour and daily charts give the most meaningful inside bars. Very short timeframes produce many that lead nowhere.