Inside Bar

An inside bar is a contraction of range. The second high is lower than the first high, and the second low is higher than the first low. The market paused inside the prior period. It is the bar version of a harami, defined on the full range rather than only the body.

Two bars. Draw the first high and low. The entire second bar, wicks included, fits between them. A bar that breaks either side is not inside.

An inside bar after an up impulse can be a continuation pause. The bullish trigger used by many traders is a break of the inside high, with risk under the inside low or under the mother bar.

An inside bar after a down impulse can be a pause before continuation. The bearish trigger is a break of the inside low. An inside bar at resistance can also break down as a reversal. The prior trend does not force the direction.

The first bar is the mother bar. Its high and low are the range the market has to leave. Inside bars are a framework for a break, not a forecast of which side breaks.

Entering in the middle of the inside bar because a pattern was named. Nothing has been decided until a side breaks and, ideally, closes out.

Contractions are normal. A string of inside bars is a coil. One inside bar in chop produces many false breaks.