How to Trade the Inside Bar Pattern: Two Prices, No Prediction

By Uladzimir Leuchankou, founder of Signal2Forex

What is an inside bar in trading? Just a small candle that fits within the candle before it? I suppose that is an answer too. But for me the inside bar pattern is two prices — the high and the low of that small bar — and a market that has not chosen between them yet.

How to trade inside bar setups follows from this. You place a buy stop above the high and a sell stop below the low. When one order fills, you delete the other. The pattern does not name the side. I checked it on AUD/USD — 22 daily bars from 12 October to 10 November 2026 — and the count turned out less simple than the pictures.

The inside bar pattern

An inside bar candlestick pattern needs two bars. The first one is often called the mother bar. The second one — the inside bar candle — has a lower high and a higher low. Its whole range sits within the range of the first.

On 15 October AUD/USD fell from 0.6972 to 0.6921. The range of that day was 88 pips — from 0.6894 to 0.6982. On 16 October the pair traded between 0.6914 and 0.6969. That is 55 pips, all of it within the bar of the day before. This is the inside bar candle pattern in its plain form.

What does an inside bar indicate? Only that the market made a large move and then a smaller one. Buyers did not get above the high of the day before, and sellers did not get below its low. Range, volatility, activity — all of it shrank for one day.

The idea is old. Toby Crabel tested such inside days together with narrow ranges in his 1990 book Day Trading with Short Term Price Patterns and Opening Range Breakout. He read them as a warning that a larger move was near. The direction he left open.

There is a close relative in candlestick books. Steve Nison’s Japanese Candlestick Charting Techniques describes the harami — a small body within the large body of the candle before. The harami compares bodies. The inside bar compares the high and the low, so it is the stricter of the two. We have a separate page on the bullish harami.

I write trading robots, so I had to turn the picture into a condition. A robot cannot look at a chart. In MQL5 the whole inside bar forex check is one line.

Bar 1 is the last closed bar, and bar 2 is the one before it. Both functions are described in the MQL5 Reference. One line — and two decisions are hidden in it.

One pip of difference

The first decision is the sign. Do you write less than, or less than or equal? It sounds like a detail. On 30 October it decided the answer. The bar of 29 October ran from 0.7014 to 0.7070. The bar of 30 October had a high of 0.7045 and a low of 0.7013. One pip below — and the condition is false.

On 23 October the same thing happened on the other side — the high was one pip above the high of the day before. On 9 November the low was 0.6854, equal to the low of 6 November to the pip. With a strict sign this is no inside bar. With less than or equal it is one.

So what is the count? Out of 21 comparisons I got two inside bars with a strict rule, three with equal prices allowed, and five with one pip of tolerance. The same chart, the same eyes, three different numbers.

The second decision is the bar itself. A daily bar depends on the hour when the server of your broker ends the day. My table uses the New York close. A server on another clock cuts the same prices into other bars, and the inside bar of 16 October can disappear.

Some quote tables also print a short Sunday bar. One of them shows 21 June 2026 with a range of 17 pips — from 0.7000 to 0.7017 — within the 40 pips of the Friday before. On paper this is an inside bar. For me it is a few hours of thin trading before Monday, and I do not count it.

If you test the forex inside bar on history, you need to write these choices down first. The sign, the tolerance, the server time, the Sunday bar. Without them two people with the same rule get different trades.

The October trade

Now the inside bar trading strategy itself, on the bar of 16 October. This is a calculation on closed bars — I did not take this trade on my account. A buy stop goes two pips above the high, at 0.6971. A sell stop goes two pips below the low, at 0.6912. The stop loss of each order is the price of the other one.

The risk is 59 pips. On one standard lot — 100,000 units — that is $590, and on 0.01 lot it is $5.90. Our page on what a pip is shows the same sum for other pairs.

On Monday 19 October the price reached 0.6994, and the buy order filled. The sell order is deleted at that moment. The low of that day was 0.6954, far from the stop.

Where is the exit? Here the pattern gives no help, and here the result is decided. The first idea — a target equal to the range of the mother bar, 88 pips. That is 0.7059. The price touched it on 28 October, seven sessions after the entry. Plus 88 pips — $880 on one lot, $8.80 on 0.01 lot.

The second idea — a target of two risks, 118 pips, at 0.7089. The pair stopped at 0.7070 on 29 October and turned. On 6 November it fell to 0.6854 and took the stop at 0.6912 on the way. Minus 59 pips. The same entry, the same stop, the same inside bar — and the opposite result.

Continuation, reversal, neither

Most articles call the inside bar a continuation pattern. The idea is simple — the trend rests for a day and then goes on. The inside bar pattern bullish case sits in an uptrend, the bearish case sits in a downtrend, and you trade only with the trend.

For me the October bar does not support this. The mother bar of 15 October was a fall of 0.72%, the largest move of that week. By the continuation rule you sell. The price went up about 150 pips instead — from 0.6921 to 0.7070 in ten sessions. This was an inside bar reversal, and a trader with only a sell stop never got a fill.

Is one bar a proof? No. I counted one pair, one month and only daily bars. I do not know whether the same holds on a year of data. But it is enough for me to keep both orders.

The opposite shape is the outside bar — a higher high and a lower low than the day before. The bar of 29 October, the day of the peak, was one. Candlestick books describe a close relative of it, and we cover that on the page about engulfing candles.

Four checks, two orders

Before the orders I go through four checks, always in the same sequence. The first check — the bar is closed. An open bar can still break its neighbour in the last hour. The second — the high is below the previous high. Then the low — it is above the previous low, and here you apply your own rule for equal prices. The fourth — the bar is a full trading day and no short Sunday bar.

Then come two stop orders, a few pips outside the bar. How many pips? Enough to cover the spread. On AUD/USD I took two.

There is another choice — the place of the stop loss. I used the other side of the inside bar, 59 pips. Some traders use the other side of the mother bar. In October that is 0.6892, a risk of 79 pips — $790 on one lot, $7.90 on 0.01 lot. The wide stop survives more noise. It also means a smaller position for the same money at risk.

The November setup

I am writing this on 11 November 2026, and the same pair is drawing the pattern again. On 3 November the Reserve Bank of Australia raised its cash rate to 4.85% by six votes to three. The Australian dollar still fell — 1.08% on 5 November and 0.92% on 6 November. The bar of 6 November runs from 0.6854 to 0.6944, 90 pips.

Then two quiet days. The bar of 9 November stayed between 0.6854 and 0.6931. The bar of 10 November — between 0.6869 and 0.6930. Two bars within one mother bar, each smaller than the one before — 90 pips, 77 pips, 61 pips.

Which side breaks? I do not know. The trend says down, and October taught me not to trust the trend alone. Above there is 0.6944, below there is 0.6854. The next Reserve Bank decision is on 8 December.

Daily bars and H1

One more thing — the timeframe. The inside bar strategy is usually shown on daily charts, and I agree with that. A daily bar holds a full day of orders from Sydney, London and New York. On H1 the same shape appears many times a week, and often it is just a quiet hour.

Our Forex V Portfolio robots work on H1, on 14 pairs. This is one reason I do not trust a single bar there. One hour is a small sample of the market. For inside bar trading by hand I would stay on the daily chart, where the market needs a whole day to draw one bar.

So the inside bar candlestick is a small thing with several decisions around it. The sign in the condition, the server time, the two orders, the stop, the target — all of this you choose before the break, and the pattern chooses nothing for you. The more of these decisions you write down in advance, the steadier your trading gets when the price finally moves.

Prices: AUD/USD daily open, high, low and close from a public quote table, New York close, 12 October – 10 November 2026; Reserve Bank of Australia, media release 2026-30, 3 November 2026; MQL5 Reference, iHigh and iLow; T. Crabel, Day Trading with Short Term Price Patterns and Opening Range Breakout, 1990; S. Nison, Japanese Candlestick Charting Techniques.