Hello all. Let me start by saying the "inside bar" trading strategy was one of the first I've ever used when I first started trading. Now, when I see threads on here or videos on youtube talking about inside bars, I think the bigger point is being missed. What makes an inside bar so appealing in the first place? It provides a very clear entry and exit point for the trader and will usually provide an excellent risk/reward ratio. Here's the issue: not all inside bars are created equally. Why would you take an inside bar trade when the inside bar candle is around the same size of the preceding candles? Below is an example of what I'm referring to. The candles circled in blue are inside bars but don't necessarily offer great risk/reward. The candles highlighted in yellow aren't inside bars but are low volatility bars that offer great potential for risk/reward.
I think the inside bar trading strategy is being taking too literal by people and they forget what the purpose of the strategy truly is. Instead, I think traders should be more focused on low volatility bars with a low true range and trade the breakout of that bar, which will often time be an inside bar. I also prefer to trade any of these breakouts with the trend. There are a ton of different ways to identify the direction of a trend so use whatever you feel most comfortable with. Any questions/comments/suggestions are more than welcome!
Edit: I also want to point out that I know these are a few cherry picked examples that worked out. Just be aware that not every trade will be a winner and I can spot several low volatility bars in the above screenshot that didn't work
I think the inside bar trading strategy is being taking too literal by people and they forget what the purpose of the strategy truly is. Instead, I think traders should be more focused on low volatility bars with a low true range and trade the breakout of that bar, which will often time be an inside bar. I also prefer to trade any of these breakouts with the trend. There are a ton of different ways to identify the direction of a trend so use whatever you feel most comfortable with. Any questions/comments/suggestions are more than welcome!
Edit: I also want to point out that I know these are a few cherry picked examples that worked out. Just be aware that not every trade will be a winner and I can spot several low volatility bars in the above screenshot that didn't work