What it means
An inside bar is a candle whose high is lower than the prior candle's high AND low is higher than the prior candle's low — fully contained within the prior. Signals consolidation/indecision relative to the prior session. The pattern itself is direction-neutral; the SUBSEQUENT breakout direction (close beyond the prior candle's high or low) determines whether continuation or reversal.
Why it matters
Inside bars represent a pause where supply and demand reach short-term balance. The breakout from the inside-bar consolidation is the trade signal, not the inside bar itself. Naked-trading methodologies treat inside-bar breakouts as one of the cleanest entry signals at structural levels.
How to use it
Wait for breakout beyond the prior candle's range (the 'mother bar'). Buy stop above the mother bar's high; sell stop below the low (OCO). Trade in the breakout direction. Stop opposite side of the mother bar. Inside bars at structural levels with clear higher-timeframe alignment are highest-conviction.
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