Detecting Inside Bar Breakout Failures with Candle Patterns

Summary

The document explains how to identify an inside bar, where the current candle’s high and low stay within the previous candle’s range, and presents an indicator for marking those formations. It describes the pattern as a possible breakout setup, with stop entries placed beyond the inside bar’s high or low. The indicator then looks at the following candle’s direction and close relative to the prior candle to flag possible bullish or bearish breakout failures.

The script uses average true range to position chart labels and colors candles to distinguish patterns and failure signals. It is a visual detection aid rather than a complete trading system: the document gives no performance results, entry and exit rules for the failure signals, risk controls, or evidence that the pattern has predictive value. The rules also depend on candle comparisons and should be checked carefully before use, especially across instruments and timeframes.

Key ideas

• An inside bar has a lower high and a higher low than the preceding mother bar.
• The indicator labels bullish and bearish inside bars and uses candle coloring to distinguish them.
• Follow-up candle closes are used to mark potential failures of the anticipated breakout.
• The document presents no testing evidence or complete risk and execution plan.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.