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Module 4: Lesson 8 Copy

  1. The Candlestick Formation on the Inside


Two candlesticks make up the Inside Bar formation. The Second Candle is entirely obscured by the first candlestick’s shadow (also known as Mother Candle). Price Action traders should take advantage of this formation. Because a smaller Stop-loss is required compared to many other formations, this will give you an excellent risk-reward ratio. The Inside Candlestick formation denotes a period of indecisiveness or consolidation. Inside Candlesticks usually appear after a significant upward or downward market movement. They can also happen at market turning points and critical decision points such as key support and resistance levels. The best way to trade successfully with the Inside Candlestick setup is to indicate the first Mother Candle’s highs and lows. The market will most likely break through the high or low and continue in this direction.

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So, in this Price Action pattern, the best way to trade is to place a buy stop order 5 PIPs above the Mother Candlestick’s high shadow or a sell stop order 5 PIPs below the Mother Candlestick’s low shadow. The Stop-Loss must be placed on the Mother’s opposite side. So that’s 15 PIPs. When the price skyrockets, you’ll be there with floor seat tickets! When the market suddenly reverses, cancel the other stop as a precaution. Create your target levels based on your previous Support/Resistance levels. Drawing a marked box from the upper and lower shadows of the Mother Candle is the first step in recognizing the Inside Candlestick Formation. This has to be extremely precise. To deal with the reversal, brilliant formations to trade at key Support and Resistance levels. It’s time to move down to the lower time frames and set up your trade now that you’ve marked the formation with your rectangle tool!

At the daily time frame, the best Inside Candlestick Formations can be found.