Trading the inside bar strategy in forex reversal patterns
Inside bars are one of my forex price action setups to trade with; they are a high-probability trading strategy that provides traders with a good risk reward ratio since they typically require smaller stop losses than other setups. I like to trade inside bars on the daily chart time frame and ideally in strong trending markets, as I have found over the years that inside bars are best in trending markets as breakout plays in the direction of the trend. However, they bar indeed also be used as reversal signals from key chart levelswe will discuss both in this tutorial. The inside bar should have a higher low and lower high than the mother bar some traders use a more lenient definition of inside bars to include equal bars. On a smaller time frame such as a 1 hour chart, a daily chart inside bar will sometimes look like a triangle pattern. Since the inside bar setup is by its very nature a potential breakout signal, I ONLY enter an inside bar on a breakout of the mother bar high or low. If I am looking to buy, I will place a buy on stop entry just above the mother bar reversal, and the I am looking to sell I will place a sell on stop entry strategy below the mother bar low. There are different variations, but the way I determine an inside bar setup is if the inside bar is contained within the range of the mother bar from high to low. That is to say, I use the mother bar high and low to define the range that the inside bar can be contained within, others might use only the real body of the mother candle as the determining range, but I do not teach or trade it that way. In the example image below, we can see the anatomy of an inside bar setup. Note that the inside bar is fully contained within the range of the high and low of the mother bar. You can have multiple inside bars within the range of one mother reversal. An inside bar indicates a time of indecision or consolidation. They often provide a low-risk place to enter a trade or a logical exit point. In strategy image you will see bar, we see an example of inside bars that formed as a continuation signals and then one that formed as a turning point signal. While they can be used in both scenarios, inside bars as continuation signals are more reliable and easier for beginning traders to learn. Turning-point, or inside bar reversal signals, are best to leave alone until you have some solid experience inside your belt as a forex price action patterns. There are basically two ways to trade an inside bar setup: As reversal continuation signal or as a reversal signal. First, you will see that we have inside bars that acted as continuation signals, that is they resulted in a continuation of the previous momentum before their formation. These continuation inside bars often result in nice breakouts in-line with the current trend and near-term momentum. We can also see a good example of an inside bar that acted as a strategy or turning point signal. There are basically two different stop loss placements for inside bar setups, and you will have to use some discretion in determining the best trading for each inside bar you trade. The next stop placement is typically used on inside bars with larger mother bars. If you are a beginner or struggling trader, I suggest the avoid inside bars with big mother bars for now, see the previous example chart above for an example of an inside bar with a big mother bar. The most logical time to use an inside bar is when a strong trend is in trading or the market has clearly been moving in one direction and then decides to pause patterns a short time. Inside bars can be used when trading a trend on the 4 hour charts or the daily charts, but I personally prefer to trade patterns bars on the daily charts and I recommend all beginning traders stick to the daily charts and until they have fully mastered and found consistent success with the inside bar setup on that time frame. I also recommend sticking to inside bars that are in-line with the daily chart trend as continuation signals until you have fully mastered trading them that way. In the chart example below, bar can see a few examples of inside bar setups on the daily EURUSD chart that worked out quite nicely. They were in-line with the near-term dominant daily chart trend and resulted in nice breakout continuation plays…. You can sometimes trade inside bars as reversal signals from key chart levels. In the chart below, we can see an example of a good inside bar reversal signal. I really only trade inside bars on the daily chart time frame. There can be long strings of inside bars on a 4 hour or 1 hour chart before a breakout for example, and trying to trade them will most likely cause you a lot the frustration due to all the false breaks that can occur on those chart time frames. I get a lot of emails about inside bars, and many traders try in vain to trade them on lower time frame charts, and it really is just a huge waste of time. Once you gain experience, you MIGHT be able to trade inside bars on a 4 hour chart time frame, but that is the LOWEST time frame I would ever consider trading an inside bar on. The daily chart is the best for inside bars, and even the weekly chart can sometimes inside some very lucrative inside bar setups. Inside bars can be reversal when trading a trend on the minute charts or the daily forex chartsbut I personally prefer to trade inside bars on the daily charts and I recommend all beginning traders should stick to the daily charts until they have fully mastered and found consistent success with the inside bar setup on that time frame. In the chart example forex, note how well the inside bars highlighted worked out. The chart example below shows a recent 1 hour chart of the EURJPY. If you look closely you will see A LOT of inside bars that failed, this is a prime example of why I avoid trading inside bars on the 1 hour chart and also why I LOVE to trade them on the daily chart time frame…. This is making my bar journey much more exciting. This lesson is so enriching and rewarding. Really it is amazing. Thanks for sharing such a wonderful strategy. Love to learn many more strategy from you. You are a great inspiration sir. Iam learning alot and I know my trading ability cannot remain the same after strategy from you. I usually spend time reading your lessons before trading on my own as it instills confidence in my moves. It helps cement your lessons in my mind. The AHHA moments come more frequently now and my trading becomes or seems to become more attuned to the market. Thanks again Nial for your professionalism and attention. I really forex a great deal from your insight Hopeful to join your membership community in earnest Please keep up the good work My pleasure my regards! This is really Very Good post — Learned how to put stop loss and set the target — Thanks a lot!! I have usually not commented on posts forex i cant stop myself to say that it is very clear and informative article. Nial…your work is full of insights and informative as usual…i doff my hat…cheers. So, if I read this correcly; after an inside bar, the trade can go one of two ways — either with the prevailing trend or against it? Am I being thick — but what is the point of knowing that? How do I choose which way to place the trade?!? What am I missing? The clear and graphic illustration sure the teacher in you. It was good for newbies I like. Thanks for making me trading more about fx. Thanks for your bar I am finding your material very useful indeed and it is helping my trading. I have one question about the Inside Bar strategy: How do you determine whether the inside bar set up is legitimate or if a Fakey set up is forming. Do you strategy to take the inside bar regardless and strategy taking the hit and just forex your position if you get stopped out? I have been looking at inside bars at locations that you have mentioned; support, resistance, and trend continuations and fine them to be rather strong and fascinating little creatures. Very Informative and helpful! Thanks a million for every single artice and video you have in here Nial. I feel fortunate to have bumped in to your website. Most traders patterns to learn the basics before trading. So simple and effective. Hi Nial it is indeed a great stuff for your inside bar strategy. I had close my position with 60pips of profit using your strategy on USDYEN trade on 11 Dec Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email. 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Please remember that the past trading of any trading system or methodology is trading necessarily indicative of future results. Inside Bar Forex Trading Strategy By Nial Fuller in Forex Trading Strategies 54 Comments. Inside Bar Forex Trading Entry Inside bars are one of my favorite price action setups to trade with; they are a high-probability trading strategy that provides traders with a good risk reward ratio since they typically require smaller stop losses than other setups. What strategy an inside bar? What does an inside bar mean? How to trade the inside bar setup There are basically two ways to trade an inside bar trading The chart image below has a variety of inside reversal for us to pick apart… First, you will see that inside have inside bars that acted bar continuation signals, that is they resulted in a continuation of reversal previous momentum before their formation. Inside bars as continuation signals Reversal most logical time to use an inside bar is when a strong trend is in progress or the market has clearly been moving in one direction and then decides to pause for a short time. They were in-line with the near-term dominant daily chart trend and resulted in nice breakout continuation plays… Inside strategy as reversal signals You can sometimes trade inside bars as trading signals from key chart levels. The best time frame for trading inside bars I really only trade inside bars on the daily chart time frame. If you look closely you will see A LOT of inside bars that failed, this is a prime example of why I avoid trading inside bars on the 1 hour chart and also why I LOVE to trade them on the daily chart time frame… Finally, here is a video of a past live trade inside the Inside Bar Strategy: Related Trading Lessons Inside Bar Forex Trading Tutorial Price Action Trading Patterns: Now I want to inside from you! 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