Today's lesson is an introduction to the inner bar signal and how to do it. It's really one of my favorite trading patterns, especially in the timeframe of the daily chart. Why do you ask?
It's easy. The pattern of the inner bar shows a pause or indecisiveness in the market. Depending on the surrounding price context it has created within the market, this provides an extremely valuable indication of what a market will do next.
The inner bar is another “tool” in your price action toolbox that extends your trading strategy and, when mastered, helps improve your chances of long-term trading success.
Let's start with some introductory concepts and theories about inside bars …
What is an inside bar?
An inner bar pattern is a multi-bar pattern that consists of a “mother bar”, the first bar in the pattern, followed by the inner bar. An inner beam pattern can sometimes have multiple inner beams within the same mother rail.
This is what standard inner strips look like:
As you can see in the picture below, inner bars can form right in the middle of the mother bar or near the high or low. There is no ACCURATE way in which they must look as long as they are included in the high to close distance of the nut rod
4 variations of standard inner bars
1. Double (multiple) inner bar
The "double inner rod" consists of two inner rods within the structure of the mother rod. They are quite common and often you will even see 3, 4 or sometimes (less often) even more within bars within the same parent-beam structure. These patterns mean a long period of indecision in the market and can occur before very strong breakout moves …
2. Wrapping in bars
Wrapping within bar patterns occurs when two or more inner bars are wrapped closer and closer together like a spring. Pay special attention when you see them, because they mean that the market is shrinking and, just like a spring that is getting narrower, will eventually "loosen" and explode in a strong pull (in many cases).
3. Fakey Pattern (within the bar false break)
The fake trade pattern is very important in relation to inner bars because there is an inner bar pattern within a fake pattern. As you can see below, a fake is actually a false breakout from an inner bar pattern. It is literally the case that the price initially deviates from an inner bar pattern in one direction, but then reverses quickly, sucks out everyone who was wrong, and then reloads in the other direction. Obviously, these give us VERY intelligent information about the next possible price direction.
4th. Inner bar Pin Bar Combo Pattern
As we all know, pin headers are one of the best price patterns you can trade with. When you get a pin header that is also an inner header, you have a combination pattern for pin headers in the inner header.
If you combine a pin header into an inner header, you will get both a settlement that is released and a header with a tail / shadow that indicates the next potential direction of the market. Therefore, an inner bar is not just a break in the market, but a break with an additional confluence behind and consequently a stronger price action signal.
Trade within bar patterns
As with most other patterns, there are essentially two ways we can trade inside bars. as a continuation signal or as a reversal pattern.
Now I prefer to trade them as continuation signals in trend markets on the daily chart as this is the easiest way to trade them openly. However, inner bars can actually be very powerful at high levels of support and resistance as reversals. Let's look at a few examples:
Trading within bars continued as a move
The "classic" way of trading an inside bar pattern and the way I prefer to trade it is a continuation in a trend market.
An inner bar is much easier to grasp in a trend market, since the chances of trading the trend are already in your favor. The inner bar often leads to a breakout or a continuation in accordance with the existing trend direction. You can offer a good structure to try to make your trade a huge profit.
Tipping: Avoid trading within bars at main levels until the level is cleared, as such inner bars often lead to a wrong break at the main level.
Trade within bars as "stall patterns" / reversals
Sometimes you can trade an inside bar as a reversal / stall pattern where the price "drops" at one level, causing a reversal in the other direction.
In the following table we see an example of a good reverse signal within the bar. Note that the inner bar has formed at an important chart level, indicating that the market was hesitant and "uncertain" whether it wanted to move higher. We can see a strong downward movement as the price collapsed after the low of the inner ledge's female header.
Please note that trading within bars as a reversal pattern should ONLY be attempted after you have successfully completed bar trading in line with the daily chart trend as sequel / breakout games as explained above.
Special inside bar trading tips
Here are some of my tips and tricks when trading in bars. These are things I've learned over the years that will improve your chances of success trading this pattern:
- Tighter patterns within the bars and winding within the bar patterns often result in explosive large breakout movements. This is due to the "stored energy" that took place when the market was "wrapped". This energy is usually released in the form of a strong burst.
- Patterns with smaller inner bar patterns allow tighter stop losses and a high risk reward, These are the ideal candidates.
- Be careful with patterns with very large mother bars and large inner bars. These can often be difficult to act due to many wrong signals and make risk management more difficult.
- My 2 favorite patterns are – Fakey Signals and – Inside Bar Pin Bar Combos.
- We have to learn to filter within bars because the only bad thing about them is that many of them form over time. With the right training and experience in the diagrams, however, you will learn to differentiate.
This was a basic introduction to the inner bar signal and how I act. I describe this pattern and much more in my advanced pricing courses. When you join, you'll learn:
- Other variations of the inner bar and how to trade them.
- More sample diagrams.
- Discussion forum for members, including discussion in the bar
- Daily members who publish market comments daily and weekly, in which we discuss possible internal trading configurations as they arise.
- Members exchange videos and articles that include more in-depth bar trading training.
- Email coaching & support line.
- Current updates for free
I hope you found today's lesson helpful and inspiring. Inside bars are really one of the most interesting and powerful price action signals. I hope you enjoyed learning from it and will continue to do so.
Please leave a comment below with your thoughts on this lesson …
If you have any questions, please contact me here.