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Inside bar

A bar whose entire high-to-low range fits within the previous bar's range, marking a contraction in volatility.

Unlike a harami, which compares bodies, an inside bar compares full ranges. The previous bar is called the mother bar. Two or more inside bars in a row indicate strong compression.

The standard play is a breakout of the mother bar's range with a stop on the opposite side. Because the mother bar range is by definition larger than the inside bar, risk is defined and often modest relative to the move that follows a genuine expansion.

Realistically, many inside bar breakouts fail: contraction resolves in whichever direction, and both sides get run in choppy markets. Filters that help are requiring the inside bar to sit in the upper or lower third of the mother bar, requiring an existing trend, and skipping setups where the mother bar range is tiny relative to atr.

Related: outside-bar, harami, narrow-range-bar

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

A range beside a trendOne chart swinging between a flat floor and ceiling, another stepping upwards inside a pair of sloping lines.Range-boundresistancesupportprice bounces between two levelsTrendingthe trend channelhigher highs and higher lowsA range has two flat edges; a trend has two sloping ones.
Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.

Educational only, not advice. Spotted an error? Post in Site Feedback.