Forex & Stocks “INSIDE BAR” Price Action Pattern Trading Strategy and Indicators

The “INSIDE BAR” Price Action Pattern Trading Strategy – The inside bar is one of the more misinterpreted candlestick patterns simply because they aren’t hard to find. This observation is especially true for those trading anything less than the daily charts.

Forex & Stocks “INSIDE BAR” Price Action Pattern Trading Strategy and Indicators.

The following steps are used when identifying the inside bar pattern on your trading charts.

1. Identify a preceding trend using price action or technical indicators.
2. Locate inside bar pattern whereby the inside bar is engulfed fully by the preceding candle high and low.

The inside bar’s range (high to low) should be engulfed entirely by the previous bar’s range, also called the “mother bar.” Another way of saying it is that the mother bar should completely engulf the range of the inside bar.

• Download “ForexWOT-InsideBarSystem” (Zip/RAR File).
• Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
• Copy the “ForexWOT-InsideBarSystem.tpl” file (template) to your Metatrader Directory …/templates /
• Start or restart your Metatrader Client.
• Select Chart and Timeframe where you want to test your forex system.
• Right-click on your trading chart and hover on “Template”.
• Move right to select “ForexWOT-InsideBarSystem” trading system and strategy.
• You will see the “Inside Bar System” is available on your Chart.

So what makes the inside bar so lucrative?

When it comes to Forex or stocks candlestick patterns, the inside bar is my second favorite pattern to trade.

Here’s why…

• It can act as a profitable continuation pattern if it occurs during a strong trend.
• It provides a favorable place to hide a stop loss.
• A tradable inside bar doesn’t occur often, but when it does it can be a highly effective candlestick pattern

 

Notice how the inside bar in the chart above formed during a strong uptrend. An established trend is a requirement for trading this particular candlestick pattern.

The reason for this is that the inside bar is nothing more than consolidation. So we have a strong trend followed by consolidation which leads to a breakout in the prevailing direction.

Pretty simple stuff, right?

• Stop Loss
  You should always secure your open trades with a stop loss order. Although the success rate of these patterns is relatively high, there is never a guarantee that the trade will work in your favor. Your stop loss is below the mother bar.

 

The chart above shows bearish inside bars that formed on the EURNZD daily chart. Note that the pair had been in a downtrend for several days, therefore these are bearish continuation patterns.

• Stop Loss
  You should always secure your open trades with a stop loss order. Although the success rate of these patterns is relatively high, there is never a guarantee that the trade will work in your favor. Your stop loss is above the mother bar.

 

Stop levels can be taken from the mother bar, or previous swing high/low (dependant on trend) as dictated by key price action levels.