What it means
An inside bar is a candle whose high and low are both within the previous candle's range (the mother bar). An outside bar is the opposite: its high and low both exceed the previous candle's.
Several inside bars in a row show compression.
Why traders use it
Inside bars show the market pausing; a break of the mother bar's range often starts the next move. Outside bars show expansion: both sides were tested in one candle and one side won.
Chart examples
Inside bars and the mother-bar breakout
Outside bar
How to identify it objectively
- 1Inside bar: high < mother high and low > mother low.
- 2Outside bar: high > previous high and low < previous low.
- 3Mark the mother bar's high and low as the breakout range.
- 4Trade a close beyond that range.
Bullish use
- 1Inside bar(s) after an up move.
- 2Close above the mother bar's high.
- 3Stop below the mother bar's low or midpoint.
Bearish use
- 1Inside bar(s) after a down move.
- 2Close below the mother bar's low.
- 3Stop above the mother bar's high or midpoint.
What confirms it
- Breakout in the trend direction.
- Breakout candle with a strong body.
What invalidates it
- A break one way followed by a close back inside and a break the other way.
How a hypothetical setup is built
Entry
On a close beyond the mother bar.
Stop
Mother bar midpoint or opposite side.
Target
1–2× the mother bar range.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Candlestick PatternsHarami and Harami Cross
- ICT Sessions & ModelsOpening Range Breakout (ORB)
- Chart PatternsBull and Bear Flags (and Pennants)
Historical testing
Not tested on The Tradeskill. Inside-bar breakouts are easy to define precisely, so they are well suited to testing in replay.
Limitations: when it fails
- False breaks of the mother bar are common.
- A large mother bar means a large stop.
- On low timeframes inside bars are everywhere.
Knowledge check
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