Inside Bars

An inside bar is a bar which is completely inside of the preceding bar. In other words, the high and low of the bar is completely inside of the bar to the left.

An inside bar indicates indecision or consolidation. The market is not sure which way to go. The buyers do not have the strength to push the market higher, and the sellers do not have the strength to push the market lower. Inside bars generally occur at market tops and bottoms, and often provide a low-risk entry and exit point.
There are two types of inside bars: Bullish and Bearish. Most systems simply trade the breakout of inside bars (or the breakout of the bar “containing” the inside bar), and do not take into account whether the inside bar is bullish or bearish.
There is however a more effective way of trading them: When a bullish inside bar occurs after a bearish trend, or vice versa, a bearish inside bar occurs after a bullish trend. These two situations give a clear indication that the previously established trend is getting exhausted.
Let’s look at a few examples:

How To Trade Inside Bars