Inside Bar

What Is Inside The Inside Bar?

Our testing revealed that wide range inside bars (with range more
than 75% of the range of the preceding bars) out-performed our
benchmark by the largest margin. These are bars that barely make
it as inside bars and represent only a slight contraction.
We also found that inside bars that closed in our trade direction
seems to have an edge. Inside bars that support our trades did
considerably better than inside bars that did not.
The other two factors open-to-close spread and volume did not
show significant improvement.
We focused on wide range inside bars that closed in the direction
of our trade.

The results are encouraging. Most of the futures contacts show
an improvement of over 8%. This is a significant edge in the
competitive field of day trading. Of course, I must emphasis the
naive and simplistic assumptions we made. This includes the 1:1
risk to reward ratio and using the 20-period EMA as a trend filter.
Our results are not meant to be used in isolation as a complete
trading system. However, this is a good start to understand more
about inside bars that occur in day trading time frames.