Direct from the desk of Dane Williams.
Today I wanted to blur the lines between forex and crypto, exploring the concept of inside bars and their variants.
To begin with, I hear you asking what is a forex inside bar?
In this particular market, an inside bar is a candlestick pattern that signifies a period of consolidation or indecision in the pair.
A pause in the action or quiet moment before a breakout.
A forex inside bar is when the high and low of a particular candle fit within the high and low of the previous candle, thus forming a tight coiled spring.
This candle pattern suggests that neither the bulls nor the bears are in full control at that moment.
Now, let's dig a little deeper.
What are some variations of forex inside bars?
Variations of inside bars can be particularly intriguing, especially when trading in the crypto market.
One interesting strategy that immediately pops into my mind is that of crypto master candles.
These are essentially larger inside bars that encompass a series of smaller candles within them.
The idea behind the master candle strategy, as discussed in the master candle strategy post that I linked to above, is to identify significant price ranges and potential breakouts in the crypto market.
This strategy involves observing multiple inside bars within the confines of a single, larger candle.
These inside bars act as mini consolidation periods within the master candle and they provide valuable information about potential future price movements.
For instance, a bullish master candle may contain smaller inside bars that indicate a period of price consolidation.
When the price eventually breaks out above the master candle, it can signal a strong bullish move in the crypto market.
Conversely, a bearish master candle could lead to a bearish trend if the price breaks below it.
In my variation to the master candle trading strategy there are some rules that try to judge how much momentum is behind a breakout and encourage you to fade if these rules aren’t met.
But how you trade this unique inside bar strategy is completely up to you.
Of course the most important thing to note is that my crypto master candle strategy isn't foolproof.
And like any trading strategy, it comes with its own set of risks and considerations.
However, it's certainly a powerful tool in any forex or crypto trader's toolkit, providing insights into potential breakouts and market direction.
Incorporating such mechanical strategies into your trading arsenal can help you become a highly effective, consistently profitable trader as you learn.
So circling back up to the top, understanding the concept of forex inside bars and their variations, such as my crypto master candle strategy, is a valuable skill that I’d encourage you to learn.
Use inside bars to help decipher the language of the market, using them as hints of potential price movements.
By following my strategy, you’re able to continue learning how to use your discretion while conducting analysis, but have a proven mechanical trading strategy that can earn you money while you learn.
You’ve got nothing to lose by trying.
Best of probabilities to you.