The inside bar is a two candlestick reversal or continuation chart pattern showing a period of market consolidation. When the inside bar pattern develops at the end of a trend, it can signal a trend reversal. At the same time, if it develops in the middle of the trend, it can potentially signal a trend continuation.

Inside Bar Features

The Inside Bar candlestick pattern has the following key characteristics:

  1. The first candle within the inside bar pattern is a big, bold bullish/bearish candle, also referred to as the mother candle
  2. The first candle has a large body and small wicks
  3. The second candle is a relative small bullish/bearish candle whose wicks and body are fully contained within the range of the first candle
  4. The second candle is also known as the Harami (Japanese term for pregnancy)

Trading Inside Bars

The steps to trade the inside bar pattern if it develops during the last stages of a bearish trend:

  1. Buy the pair when the price breaks above the highest point of the Harami candle
  2. Alternatively, a more conservative approach is to wait for a break of the mother candle
  3. The stop-loss is placed on the opposite side, i.e., below the mother candle's low