The Double Inside Bar is a candlestick pattern that is an extension of the Inside Bar pattern. This pattern is used to indicate both continuation and reversal signals, especially during breakouts. The main difference between the Double Inside Bar and Inside Bar is that the Double Inside Bar consists of three candlesticks, where two candlesticks are within the high and low range of the first candlestick.
Executing Day Trading Using the Double Inside Bar:
Standard Breakout Trade:
- Identify the market trend.
- Place buy stop orders above the high of the first candlestick (parent bar) and sell stop orders below the low of the parent bar.
- Use the Inside Bar to determine stop loss for aggressive entry.
Breakout Failure Trade:
- If there is a bearish trend, observe the formation of the Double Inside Bar.
- Avoid taking setups against the trend (counter-trend setups).
- Wait for a strong breakout in the direction of the dominant trend before entering a position.
Prolonged Congestion:
- If there is prolonged congestion, observe the formation of the Triple Inside Bar.
- Avoid taking breakouts from the Triple Inside Bar as the market lacks direction.
- Use the long upper shadow on bullish breakout bars as an indication of bearish pressure.
Multiple Patterns:
- Observe patterns like the Triple Inside Bar followed by the Double Inside Bar.
- Use the relationship between the two patterns to assist trend analysis.
- Wait for a breakout from the parent bar before entering a position.
The Double Inside Bar pattern is a useful tool for day traders to identify potential entry and exit opportunities. With high accuracy, this pattern can be used as a single signal without the assistance of other technical indicators. However, it's important to always pay attention to the timing of pattern formation and overall market conditions to reduce the risk of losses.
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