Price action: inside bar and breakout

What is an inside bar?

An inside bar is a candle whose entire range — from wick high to wick low — sits completely inside the previous candle (called the mother bar). The inside bar shows compression: neither buyers nor sellers could push beyond the previous candle's range.

The mother bar sets the range. The inside bar is contained within it. When price is compressed inside a range, energy builds for a breakout.

Why inside bars form

Inside bars typically appear after a strong directional move (the mother bar), during pauses in trend, or near major support and resistance levels. The market is waiting — participants are deciding whether to continue or reverse.

Trading the breakout

The inside bar setup is based on the breakout of the mother bar's range.

Entry: place a buy stop just above the mother bar high (for bullish breakout) or a sell stop below the mother bar low (for bearish breakout). When price breaks out, your order triggers automatically.

Stop loss: place it on the opposite side of the mother bar. If you buy the breakout above the high, your stop goes below the mother bar low. This keeps risk defined by the full setup range.

Target: measure the mother bar's height and project it from the breakout point. Alternatively, use the next structural level.

What makes an inside bar setup stronger

Failed breakouts

Not every inside bar breakout follows through. Price can break above the mother bar high and reverse quickly — this is called a failed breakout or fakeout. To reduce this risk: