Lesson 6 of 6 · 8 min
Inside Bar
Step 1
What it is
An inside bar is a candle whose high and low both sit within the candle before it. That earlier candle is often called the mother candle.
It shows the market has paused. It says nothing about which way the pause will end, so we wait for a close beyond the mother candle.
Traders use it because a small pause gives tight, clear levels to plan around.
Step 2
See it on a chart
An inside bar on low volume, then a break with volume returning.
Illustrative chart with made-up prices and tick volume, built for teaching. It is not real market data and not a trade idea.
Step 3
The exact rules
What must be true before entry
- A high and low within the candle before.
- Lower volume on the inside bar.
- A close past the mother candle, with volume returning.
What volume should show
Where to enter
Where the hard stop goes
Where the target goes
What invalidates the idea
- Price closes back past the far side of the mother candle.
- The break came on thin volume and is already fading.
When not to take it
- The mother candle is so large that 3:1 is not possible.
- Inside bars keep forming in a flat market.
- Major news is due soon, or you would be trading outside your planned hours.
- You have just taken a loss and feel the need to win it back.
Step 4
Your turn: plan the trade
An inside bar on low volume was followed by a break down with volume returning, and price is back at the mother candle. Mark your plan.
This setup is a short. Look at the candles and the volume. Choose a line below, then tap the chart to place it. You can also drag its label or type a price.
Illustrative chart with made-up prices and tick volume, built for teaching. It is not real market data and not a trade idea.
Step 5
The trap: guessing the direction early
During a pause, it is tempting to get in first for a better price. That is a guess. A close beyond the mother candle costs you a little on price, and gives you a real reason.
Take the Personal Litmus TestStep 6