Inside Bar System

Here is a very simple pattern to look for that is worth having in your trading arsenal. The inside bar is quite simply a bar (doesn't matter what time frame) that has a high lower than the previous bars high and a low higher than the previous bars low. It is basically a period of indecision in the market or a pause. One thing that is certain about the market is it HAS to move, there is no point there being markets if they don't facilitate some change in price. So when we have an inside bar we wait for either the high or the low to break with the stop loss at the other end of the bar. So if we had a breakout to the upside the stop loss would be the low of that bar. On its own this provides a very good risk reward profile. Again I would advise take off half your position when you are onside at least what your original risk on the trade was.

I would also suggest waiting for a market to be trending as choppy market conditions will ofter break the inside bar and not have any follow through. You are looking for a pause in a strong move.