The Inside Bar Strategy indicator is a popular candlestick that guides traders on entries during a low-risk period. The strategy employs the use of a trend or reversals while trading. The indicator only requires two candles to present itself, mainly used to show the reluctance of prices to progress either above or below the preceding candle high/low, thus giving market indecision. (Click this link to access an economic calendar for your trading strategies )
Features of the Inside Bar Strategy Indicator
• Identifies a trend using a price action/technical indicator
• Uses candle high and candle low
• Inside Bars are not all equal
• Inside bars show a period of consolidation in the market
How Inside Bar strategy Indicator Works
As indicated above, Inside Bars have different sizes, which means they can also vary in range. Following are types of bars that you can utilize when using the Inside Bar Strategy:
1. The standard
The bar has a small range which is covered by the previous candle. Traders get the information that there is indecision from and low volatility in the markets from this bar.
2. The Inside Bar with a huge range
The bar is also covered in the previous candle, but it has a huge range compared to the standard. Depending on the close, the bar may represent a trend, indecision, or a market reversal.
3. Multiple Inside Bars In a single candle pattern
When a trader encounters this bar, it is an indication that there is low volatility within the markets. With the market volatility constantly shifting, it guides in seeing multiple Inside bars together, which indicates a big movement in the market.InSide Bar Strategy Indicator | Indicator Series Click To Tweet
How traders can manage entries and exits Inside Bar Strategy
Many traders opt to enter the market using a stop order and when price breaks out of the indicator. Many people prefer this method because they enter the market when the prices are in their favor. It is essential to note that there is always a possibility that there may be a false breakout. Traders should always give candle time to close, which also carries a risk of missing a massive move in the market.
Going by the trader’s objective in the market, every trader’s exit varies from one another. Traders eager to capture a swing find it more okay to exit before there is any opposition. According to their prediction, a trader who sticks to ride a trend trails their stops when the markets start to change.
Traders use the Inside Bar strategy by giving the price time to make a reversal move, resulting in forming an Inside Bar. Using this method, they can have a control on their position that is based on specific criteria, which ensures that management of a perfect entry point is possible by waiting for an ideal reversal in the market,
Also, if the prices break out higher, a volatility contraction is expected, bringing about a buying pressure to continue pressing.
For more trading insights, subscribe to tradingview.com and join other traders in the discussion.