The Inside Bar strategy is a wonderful strategy to help you find when the market is in indecision and often times consolidation areas. This normally happens at the tops or bottoms and at key points of major support and resistance levels as well as breakout levels.
So, what is an inside bar?
An inside bar is a bar or series of bars which are completely inside the range of the previous bar or bars. On a smaller time frame it will look like a triangle so you should be able to spot them fairly quickly.
The strategy of the inside bar trade happens when an inside bar has happened in either an up or down trend. Once we have seen an inside bar, draw a horizontal line on the mother candle, which is the candle which the current bar is inside to which ever direction the inside bar is suggesting. So if you are in a down trend as the image below suggests you would draw the line to the upside of the mother candle at the top of its wick. Once a candle has closed above the line you have drawn, you may either wait for a pull back or enter immediately on the next candle.
Time Frame: 5 Minute Candlesticks
Pros: Easy to spot.
Cons: At times in the smaller time frames you may get faked out if you take the trade too early.