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The Double Inside Bar candlestick pattern is characterised by two consecutive inside bars nested within the high and low range of the preceding bar. An inside bar forms when a candle’s entire price range falls within the previous candle’s high and low range. The occurrence of two such inside bars in succession encapsulated within the range of the preceding candle marks the formation of a Double Inside Bar pattern.
The Double Inside Bar can be termed as the trend’s consolidation or breathing space. A break on either side can lead to continuous or reversal movement.
Trading Strategies Utilizing the Double Inside Bar:
1. Breakout Strategy:
Traders eagerly await a decisive move beyond the high or low of the Double Inside Bar formation, signalling a breakout from the consolidation phase. This breakout often paves the way for significant market movements. Upon confirmation of the breakout, entry can be initiated, accompanied by robust volume and momentum.
The stop-loss is placed at the low of the inside bar for bullish continuation and high for the bearish.
2. Reversal Strategy:
The Double Inside Bar pattern is a consolidation phase and a potential reversal signal. This is especially true when it forms near crucial support or resistance levels. Traders can anticipate a reversal in the prevailing trend when a Double Inside Bar pattern emerges following a prolonged uptrend or downtrend. Confirmation through subsequent price action in the reverse direction of the prevailing trend further solidifies this signal.
The Double Inside Bar reversal also confirms the exhaustion before reversal.
The stop-loss is placed at the low of the inside bar for a bullish reversal and the high for a bearish reversal.