In order to create a successful trading method that will work for you in the long run, it is important to consider all possible trading strategies available to you. There are plenty of different trading styles to choose from and you have to decide which one will suit you the best. If you have any previous knowledge of candlestick patterns, you will get a full grasp of inside bar Forex strategy in no time. It might seem difficult in the beginning but we are sure you are capable of mastering it and using inside bar trading strategy to your advantage.
Inside Bar Forex Trading Strategy
The basics of inside bar trading strategy
Inside bars strategy involves analysing the candlestick patterns and identifying the inside bar in comparison to a previous bar (or the mother bar). It needs to be either smaller or within the range of a previous bar. This means that the inside bar has to be lower than the mother bar’s high and the low of the inside bar has to be higher than the low of the mother bar. Yes, it does seem a bit confusing when we put it like this but try to visualize it and it will make sense.
Inside bar Forex indicator occurs after a major directional switch in the market and they appear as a way of stabilising the market situation. They might also emerge at the turning point in the daily charts. Whatever the reason, they are one of the easiest indicators to use in your trading strategy because they are very visible and if you master the basics of this trading strategy, you will start spotting them very quickly.
What is not considered trading inside bars?
Sure enough, some traders are flexible and they look for equal lows and highs of both mother bar and inside bar, ignoring the definition we have presented to you in the above text. However, this is not trading inside bars even though they might claim it is. Trading inside bars requires the difference between the bars and that is a rule you have to follow if you plan to use this trading strategy.
How to trade using inside bar strategy
To put it as shortly as possible, general rule of trading inside bar Forex is to place a buy order at the high point and a sell order at the low point of a mother bar. Once the trend moves below those entry points, your buy or sell order is set in motion. If you need to ensure you will not lose any sufficient amount of funds, you have to place a stop loss order somewhere within a bar.
Depending on whether you are trading long or short, you might want to put your stop loss order somewhere at the top or the bottom of a bar. The beginners are advised to place a stop loss order somewhere in the middle of a mother bar since that might be the safest exit point for them.
Again, this is just a general inside bar setup and you may place your stop loss orders wherever you want. Experienced traders are more confident and they are prone to experimenting with the inside bar strategy and putting their stop loss orders at the different points of a bar. You are free to do so as well if you are sure of your trading and analysing skills.
Useful strategy for day traders
Inside bar trading strategy is ideal for daily traders since they focus on analysing the time frame of a single day and they will be the ones who will most likely benefit from this type of trading method. If you start looking closely at the tighter spreads, the chances are you will most likely identify some of the false signals which will take you in a wrong direction.
If you are trading trends, this strategy will work pretty well for you. It may be used in both down trending and up trending situations and since candlesticks are very visual, you will easily spot indicators and identify the pattern of a mother bar and an inside bar on your charts.
Weighing out the risk factors which are inevitable in every trading strategy is a must and inside bar trading offers a pretty solid risk to reward ratio. Especially if we take into consideration the fact that a stop loss order is generally preferred within this strategy and it is often placed in the spot which will ensure that you will not be losing a substantial amount of funds if the market turns against you.
Practice makes perfect
Demo accounts are a perfect place for testing out your knowledge and we encourage you to practice as much as you possibly can before you go to your live account and implement this trading strategy for the first time in real trading environment. If you don’t know where to start, our suggestion is to begin looking at daily charts and choose a market that is currently trending. This might be the best way for you to start picking up the patterns since they will be pretty visible.
Test this strategy on 25 USD account from easy-forex:
Inside bar trading strategy is recommended by many Forex experts as the best way to start understanding candlestick charts and start using them with your trading method. Inside bar Forex trading setups can be easily mastered by beginners although it is recommended that they first make use of demo accounts in order to be sure that they have a good grasp on this strategy.
Risk to reward ratio is extremely good with inside bar trading strategy and if you follow the general guidelines presented in this text, the chances are you will make a profit. Of course, you can’t expect an overnight success and you have to work hard in order to earn funds in the market. Therefore, it all comes down to your motivation and dedication to Forex trading. Even though this strategy is easy to implement and execute, it will take some time before you see big numbers on your account. So learn the basics on analysing candlestick charts and start practicing inside bar strategy because it might be the ideal option for you.