What does an inside candle mean??

I can't find to find an answer with google. Can anyone please help me?

I think you are referring to what is also known as an "inside bar" or IB. Google "inside bar". Also this Candlestick pattern is known as "Harami".

This happens when the candle in question is "engulfed" totally by the previous bars high to low range. A 2 candlestick pattern.

The pattern is traded as a breakout pattern. Useful pattern in your toolbox.

Inside bar is something reversed from outside bar

An inside bar or Harami is naturally a bar that is completely (highs and lows) engulfed by the previous bar. It can be taken as a sign of indescision and offers an opportunity to trade a breakout with a smaller set of parameters (lot sizing, risk etc) than other price action bars.

Trading them is simple. Take a trade at either the break of the high or the low. Incorporating some ground rules to help maximise the probability of have a trade in the right direction is the part that can take some homework. Also learning when they have a higher chance of working can also be key to maximising your chances of being successful. The DIBs thread is the perfect place to start with many of us sharing our work on the subject.

Razor

Thank you very much gentlemen. I noticed it looks like Harami when I looked into candlestick books.

hi, if you're interested. this thread is dedicated to trading this particular pattern. thanks

http://www.forexfactory.com/showthread.php?t=86766

I have found with Forex you can "bend the rules" slightly with inside bar definitions.
Typically the first candles high to Low range is larger and totally "engulfs" the next candles high to low range.

With Forex, as long as the main body of 2nd candle is engulfed (open - close) you can ignore the wicks, the pattern is still valid.

If there happens to be a sharply higher or lower wick on the 2nd candle often is a sign of reversal by itself & combine it with inside bar or Harami pattern even more powerful.

You have resistance to a higher or lower price combined with total indecision by buyers & sellers.

By the 'break', do you mean the break high/low of the second candle or the first one?

please advice.

I've had better trades taking inside bars that breakout and then retest. I would enter on the retest.

The first chart shows the last inside bar setup (the last one I see, it actually has a few inside bars). This inside bar happened about 20 hours ago. This is a 1 hour chart and I have a vertical yellow line right through the first candle of the pattern and horizontal lines at the high and low of the first candle.



The second chart is a 1 minute chart. If you zoom down to the 1 minute chart, you can see the breakout and retest.

The vertical line still shows the beginning of the pattern. I have two checkmarks where there was a breakout and retest. You could enter on the retest with your stop loss on the other side of the bottom horizontal line.

YES there are two "small breakouts", but I would not take these because they do not breakout and "clear" and then retest (if that makes sense).

This should be the second chart in my previous post...