Inside Candle Trading Strategy — Intraday
Shared by Shreya
The name is inside a candle which means a candle should form inside a candle. It doesn’t matter whether it is a big candle or a small candle.
Basically, it is a pattern which consists of Mother candles and baby candles.
Whenever the market moves in a continuous trend, connect to what happens, you must have seen many times that the market goes down, takes a pause, and then goes down, we are going to trade with this Pause. The inside candle pattern indicates some consolidation and a possible breakout to either direction based on the market condition.
You can take 3 buy trades or 3 sell trades, or a mix of trades — it all depends on your risk potential. You can define the stop loss for a day according to your risk appetite.
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How to trade it:
- we will trade it in the time frame of 15 minutes to buy and sell.
- We will trade with when the mother candle and the baby candle formed inside it.
- what is the previous trend, it is a little positive to you looks like the previous trend is positive, and we can execute the trade against the trend.
For Buying:
We use a 15-minute timeframe for buying stocks or indexes with a simple candle pattern.
If the trend is bullish/buying, The baby candle must break the mother’s candle highs. To enter into the trade, the candle should be close between the mother candle it can be a red or green candle i.e. No part of the candle should be touching the mother candles high and low. This will be our alert candle. Whenever it gives a breakout, immediately we will take that trade. i.e. whenever the next candle breakout the baby candle you should take the long trade, and the alert candle low will be our Stop Loss level. The minimum target you should plan for will be 1:3 and you can trail the profits according to the trend and risk appetite.
Example:
In the above example, as marked in the activation zone is formed inside candle, and the next candle given a breakout and becomes the activation candle. The high of the alert candle is the buy level and the low will be the stop loss level. You should minimum plan for a 1:3 target and trail strictly after that.
For Selling:
We use a 15-minute timeframe for selling stocks or indexes with a simple candle pattern.
If the trend is bearish/selling, The baby candle must break the mother’s candle lows. To enter into the trade, the candle should close between the mother candle, either green or red, without touching the lows and highs of the mother’s candle. This is the alert candle, not a confirmation candle. If the next candle is also completely trading between the mother candle and has not touched the high and low levels, then the previous alert candle should be ignored and the new candle should be considered as a new alert candle. Whenever a breakdown occurs, the trade should be taken immediately. That is, whenever the next candle breakdown the alert candle, a short trade should be taken, and the alert candle high will be the stop-loss level. Set the stop loss above the previous baby candle heights. The minimum target you should plan for will be 1:2 and you can trail the profits according to the trend and risk appetite.
Example:
In the above example, as marked in the activation zone is formed inside candle, and the next candle gives a breakdown and becomes the activation candle. The low of the alert candle is the buy level and the high will be the stop loss level. You should minimum plan for a 1:3 target and trail strictly after that.
Some extra conditions:
- The strategy involves identifying a pause in a continuous trend and trading based on a candle formation. The recommended time frame for trading is 15 minutes.
- The strategy gives the importance of managing risk and accepting small losses.
- The strategy can be used for both buying and selling, with different options for choosing strike prices.
- There is often confusion around the wicks of the candlesticks. To clear this up from the start, the inside candle strategy takes into account the candlestick wicks. This means that the high and low, including the wicks of the candle, must be within the high and low of the previous candlestick.
- We can use this strategy for stocks also, but we have to look at liquidating stocks.
- We can catch 80% — 90% off the trend’s momentum with this strategy.
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Disclaimer: The strategy has been published many times on pos and other youtube channels.
