[Music] hey traders in this video we're going to be talking about a powerful Candlestick pattern
known as the inside bar which can be a very effective way to trade momentum in the market
I'm going to break down exactly what this pattern is and exactly how you can apply it to your own
trading so make sure to stay through the entire video you're not going to want to miss out on
this because I've used this exact pattern to make thousands of dollars in the stock market
with my own personal Trading so let's go ahead and get started what is an inside bar well for
those of you that are familiar with different Candlestick patterns you can kind of think of
an inside bar as the opposite of an engulfing Candlestick and with an engulfing Candlestick
what we see is it's going to be a Candlestick that completely surrounds the previous Candlestick so
essentially an inside bar Candlestick is going to be the opposite of that where we have a smaller
Candlestick that is going to be completely within the range of the previous larger Candlestick and
this can look like the examples that we have down here at the bottom of the screen but obviously
there can be different variations of this as well it is going to be an inside bar still as long as
that Candlestick is completely within the range of the previous okay now this can be applied to
any time frame so these candlesticks can be you know representing one minute of price action they
can be five minutes of price action or they can be a longer term time frame like the daily chart
where each of these candlesticks would then of course represent present an entire day of price
action the time frame is really going to have a big effect on the way that you trade this pattern
but the same trading concepts are going to apply to any time frame all right now before we move
over to the trading platform and look at some real examples I want to just break this down a little
bit further to show you how I would actually look to trade an inside bar breakout right here we can
see we clearly have ourselves an inside bar this smaller Candlestick is completely within the range
of this bigger Candlestick and what this smaller Candlestick is going to do or at least the way
that I like to trade this pattern is it's going to give us a breakout level and it's going to give us
a risk level and those two levels are simply going to be from the high and the low of that
inside bar now because this initial bar here is going to be to the upside it's a strong move up
the way that I like to trade the inside bar is to look for then a breakout or a continuation
of that first move so I would look to go long on the breakout above that breakout level using
then the low of that inside bar as a risk level and obviously nothing is going to work 100 of
the time in the market there's going to be false breakouts and there's going to be times where it
might look like it's it's a perfect breakout and you're going to be you know making money
from the momentum but the trade ends up failing and it reverses backwards on you so just to show
you an example of what this might look like we could see that there might be occasionally a
very quick false breakout above that breakout level and if you're not quick to take profits
on that breakout you may end up taking a loss on the trade and at the end of the day losses
are 100 inevitable so there is nothing wrong with that what's more important is that you're managing
risk so that your losses are still very small and very controlled and that's where the risk level
is going to come into play once it starts to break down below the inside bar is low or our risk level
in this case that is exactly where you want to cut your losses and manage your risk for that position
so if we go ahead and apply that information to some real examples in the stock market we could
see that this is a really great and effective trading strategy because not only does it allow
you to capture a large breakout but it doesn't really require you to use any kind of scanner
or any kind of screener and it doesn't really require you to be very early to the trade because
if we take this example here with viaf biaf had a big run here from a low of about 170 up to a high
of 399 within the same day and the great thing about this strategy is biaf doesn't even need
to be on our radar for that day in order for us to capture and move using the inside bar breakout
trading strategy so what we can do is we can just look at the top percent gainers from the past day
or the past couple of days we can put all of those stocks in a watch list and we can let them trade
the following day to see if they form an inside bar and then we can simply look for a breakout
the next day just like we see here with bi is if we go ahead and draw a box around this we can see
we of course have our main bar and then we're going to have our inside bar here and then we
get a breakout above the high from that inside bar and it pushes from that breakout level at about
285 up to a high the following day of 367. so it goes up over a dollar per share from the breakout
level and you can see it never pulls back and it doesn't even reach the risk level but it is there
in case we do have to manage risk on that trade another example that we can take a look at is bwen
uh b-w-e-n we can see there was a big gap and go uh so if we go ahead and draw the breakout level
and then the risk level here using the inside bar that's going to be our breakout level and
the low is going to be our risk level we can see of course we get a breakout to the upside and it
runs from the breakout level of about 474 up to a high the following day of 565 and then it kind of
consolidates straight sideways ends up hitting a high of 6.10 so just those few examples show how
effective this trading strategy can be now both of these have been examples on The Daily charts but
like I mentioned you can use this same pattern on any time frame so you can also spot these patterns
on the five minute charts or the one minute charts and those are going to be more effective for very
short-term scalp trades but regardless I would recommend looking for this pattern you know even
if you're using a shorter term time frame on your charts now before you click off this video stay
put because I do want to show you now how you can use this exact same strategy to also make
money when a stock goes down so because this is a pattern that in my opinion is best traded with
momentum momentum can of course be to the upside or to the downside so another great way to trade
the inside bar pattern is to look to short sell if the momentum happens to be to the downside
so here we clearly have an example where the momentum is to the downside we get ourselves a big
downward candle following that we get ourselves an inside bar and of course when we short sell
what we look to do is take profits as a stock moves lower so that means that as a stock goes
to the upside that is going to cause us to take a loss on that short position so in this case our
risk level would be to the upside and we would be using the high of the inside bar as our risk level
on the other hand our breakout level in this case is going to be to the downside as we're looking to
capture that downside momentum so we would look to short sell the breakdown below that breakout level
and ride that momentum lower and lower I've found that this is most effective if the stock is in a
clear downtrend as opposed to there just being one single big downward Candlestick if the stock is
trending lower and lower throughout the day that to me is going to be a better breakout to short
sell as opposed to a stock that might be trading sideways or isn't clearly in a downtrend Trend
at the time so back over to think or Swim now I wanted to give an example with the stock that has
downward momentum for us to short sell and also on a shorter term time frame as opposed to the daily
chart so if we take a look here at Tesla this is a great example because this also proves that this
can be applied to options trading as well you could look to instead of short sell this stock
buy put options in this move and that would be a great way to go about capturing the downward
momentum that this stock has but what we can see here is the stock kind of Trades sideways out of
the market open and then the direction starts to become very clearly to the downside and we
can see that right here these two candlesticks are going to be our main downward candle followed by
our inside bar so if we draw the risk level and then the breakdown level for this inside bar we
can see that if we zoom in a bit further just to make this a bit clearer we get ourselves a
breakdown below the breakout level that's going to be our signal to short sell and we can see it
falls then from that breakout level of about 172 per share down to a low um just about 20 minutes
later of 168 dollars and 30 cents so it falls about four dollars per share from that breakout
level depending on the expiration date and the strike price that you're trading for your options
there were most likely some put options in that time frame that were up 30 40 even 50 or more just
from that small move from this inside bar breakout but that is again how effective this strategy can
be that's why I wanted to make this video on it because it is a strategy that I use almost every
single day in my own personal trading so hopefully you found some value in this video if you did
please make sure to give it a like And subscribe to the channel and if you want to learn more about
day trading swing trading and long term investing or if you want to join us in our trading chat
where I call out inside bar breakouts just about every single day you can find more information on
that at my website maps to the market which will be the first link Down Below in the description
but anyway thank you again for watching I hope you enjoyed and good luck with your Trading
[Music]