Fakey, Pin bar, and Inside Bar candles are three important patterns in the Price action trading method. The model is not too complicated and is highly reliable, so it is increasingly popular with traders. In this article, we will help you understand the pattern and how to trade it. Let’s follow the following article on Forex Trading!
What is the specific concept for the Inside Bar?
Inside Bar is also known as an inside candle. This is a pattern consisting of 2 candles: Mother Bar and Inside Bar. The mother candle has a larger and longer body than the inner candle. This pattern often signals the continuation of the current trend as well as the end of the previous trend in preparation for a new trend.
Learning about price model is also a way to help you understand the market better. Price patterns are a tool in technical analysis. Use price charts to represent every transaction that has occurred over a certain period. It will help reflect the psychology of market participants.
Similar to the price model, double bottom chart pattern will be the next knowledge you should learn. The double bottom pattern, or Double Bottom, is a reversal signal from a downtrend to an uptrend on the price chart. Usually appearing at the end of a downtrend, this pattern is also known as a bullish price reversal.
Features of Inside Bar
Inside candles are a useful tool for traders to monitor price action. However, to use it effectively, it is necessary to master important characteristics. The most important thing is that the clear candle must be completely inside the mother candle. And there must be a lower high and a higher low than the mother candle.
Traditionally, when the mother candle is bullish (blue), the inner candle must be bearish (red), and vice versa. However, today there are many variations of this model. This does not necessarily require two Japanese candlesticks of different colors. This candlestick must be inside the mother candlestick.
See more: Analyze & forecast trend effective candlestick pattern
What does the Inside Bar candle mean?
As a powerful candlestick pattern trusted by many traders, this pattern has many important meanings:
- Candles provide signals about trend continuation and reversal. In particular, signals of trend continuation are considered more reliable and easier to understand. Reversal signals require trading knowledge and experience.
- In setting up an order, the inside candle helps identify a low-risk price area to open or close the order appropriately.
- Inside Bar shows that the market is consolidating or indecisive. This means that both buyers and sellers are easing pressure after a period of downtrend. Since then, transaction volume has also decreased. This is illustrated by the fact that the inside candle has a higher low but a lower high.
Types of Inside Bar candlestick patterns
As mentioned earlier, this model comes in many different variations. Therefore, in this article, we will introduce the 4 most popular and standard types of patterns.
Inside Bar multi-candles
The multi-candle Inside Bar is an expanded version of the basic pattern, which can include 3 or more candles. The most common form is Double (multi). With 3 candles as shown, including 2 clear candles and 1 mother bar.
Similar to the basic pattern, the color of the candles is not important. The most important thing is that the candles must be smaller and completely contained within the Mother Bar candle. If the inside candles are larger than the mother candle, it is not considered an Inside Bar pattern.
Nested Inside Bar candles
Coiling Inside Bar is when two or more candles are inside each other. This means that the following candles completely cover the previous candles from top to bottom.
Nested candlestick patterns are considered stronger than basic patterns. Because it shows the accumulation of the market evenly and beautifully. It also signals that accumulation is being compressed and that a strong spike is about to happen, pushing the price far away (possibly increasing or decreasing sharply).
Fakey Inside Bar candlestick pattern
Fakey Inside Bar is a complete model with many important meanings. It represents a stronger reversal signal than the basic candle.
This is also a combination of this pattern with a false breakout. Specifically, when the price breaks out of the pattern in a certain direction. However, it then quickly reversed in the opposite direction. This causes many early trend traders to fall into the trap of a reversal.
However, the reality is that the breakout was just a fake. After the Fakey candle is formed, the market usually continues to move in the previous trend.
Inside Bar – pin Bar combination
Inside Bar – Pin Bar is when a pin bar is completely covered by a previous Mother Bar candle. This pattern can be called both a clear candle and a Pin Bar.
Compared to the basic candlestick, the Inside Bar – Pin Bar is considered a price action model that predicts a strong reversal. It shows that the market is consolidating and ready for a breakout in a particular direction.
Ways to trade with Inside bar
The method of trading with inside candles seems simple and direct. It can be divided into two main ways: setting up a continuing trend or following a trend reversal.
Usually, this pattern will be a continuation pattern. It often appears during strong market trends. However, it can also provide reversal signals when forming at key resistance or support levels. To better understand how to trade in each case, we will look at it in more detail in the next section.
With a continuing pattern
In case the market is trending down:
- Place a sell-stop order at the bottom of the inner candlestick to make a profit or enter a Sell order when the inner candlestick declines until the child candlestick creates a lower bottom than the mother bar at the end.
- Start placing a stop-loss order a few pips away from the top of the parent candle.
- Take profit is calculated at the R: R ratio of 1:2.
In case the market is trending up:
- Place a buy-stop order at the highest price point of the mother candle or a Buy order when there is confirmation of the bullish candle and after the child candle creates a higher peak than the mother candle at the end.
- Start placing a stop-loss order a few pips away from the bottom of the parent candle.
- Take profit is calculated at the R: R ratio of 1:2.
With reversal candlestick pattern
When trading with a candle in a reversal, it should be noted that it must form at an important price area, which has been tested by the price many times before.
- If this appears at an important support zone, it is a signal that the market will increase strongly afterward.
- On the contrary, if it appears in the resistance area, it will be a sign that the market will decline sharply.
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Notes when trading
When trading with candlesticks, traders should note the following points:
- Choose a time frame from H4 or higher for easier trading, as it works best on daily time.
- Trading reversals at important price areas requires experience and practice.
- The multi-candle pattern signals that the market has been accumulating for a long time to prepare for a strong breakout.
- Place stop loss near the entry point to protect capital, but also be careful about having your stop loss swept because the stop loss point is too close.
- Always be wary of the fake breakout pattern – Fakey is a pattern that can easily trap new investors.
Conclude
Above is the basic and important knowledge about the Inside Bar candlestick pattern that you should learn. Mastered and applied flexibly, this model will become a powerful tool to help you trade successfully and make stable profits. Please continue to follow Forex Trading to gain other useful knowledge!
FAQs
What are candlesticks in trading?
A contained candlestick is a common chart pattern in technical analysis that appears when a candlestick or bar is completely within the range of the previous bar.
How to identify candles within the chart?
To recognize an inside candle, observe a candle or bar whose high is lower than the previous bar and whose low is higher than the low of the previous bar. This pattern must lie completely within the range of the previous bar, known as the ‘mother bar’.
What do candlesticks suggest in the market trend?
It often appears during periods of market consolidation. This is considered a sign of indecisiveness. While both buyers and sellers lose control. When the market breaks out of this pattern. That could indicate the start of a new trend.
