Inside Bar

An inside bar is a candle with a HIGH lower than the previous candle's high AND a LOW higher than the previous candle's low. The whole range is "inside" the prior candle. It signals consolidation — neither buyers nor sellers had enough conviction to break the prior range. That coiled energy usually releases as a breakout in one direction or the other. Inside bars are popular with swing traders because they offer clear entries and tight stops. Buy on a break of the inside bar's HIGH (with a stop below its LOW), or sell on a break of its LOW (with a stop above its HIGH). The risk is small relative to the potential move because you're trading the breakout of a small range. Inside bars at major support or resistance are especially powerful. The market is coiling at a key level — when it breaks, it usually breaks hard.