Lesson 3 — Inside Bars (IB): The Mother-Bar Break
Goal: Trade expansion after contraction. An inside bar is the pause; the trade is the close beyond the mother-bar range, aligned with context.
1) What is an Inside Bar (IB)?
- Inside Bar (IB): A candle whose high is lower than the previous candle’s high and low is higher than the previous candle’s low.
- Mother Bar (MB): The candle before the IB. Its high/low forms the “box.”
- Meaning: Compression / balance. We expect a later expansion.
Key idea: The signal is not the inside bar itself; it’s the close beyond the mother-bar’s high/low.
2) How your indicator marks IB breakouts
- The arrow prints on the breakout candle that closes beyond the mother-bar’s boundary.
- The candle just before the arrow is the IB; the candle two bars back is the mother bar.
- Signals are gated by confluence from the PA Context HUD (trend, last impulse, levels, false-break, session). If score <
MinScore, no arrow. - Hover the tiny dot next to the arrow to see why it printed (score + distances to PDH/PDL/PWH/PWL in ATR units).
3) When IB breakouts are worth taking (context)
- With the last impulse: Prefer a breakout in the same direction as the most recent strong push.
- Location: Near useful levels (PDH/PDL/PWH/PWL) or the base of the last impulse. Bonus if there’s a recent false-break of that level.
- Trend alignment: EMA-21 and optional HTF EMA in the same direction adds quality.
- Session: London/NY hours often produce cleaner follow-through.
4) Entry rules (simple)
- Mark the MB range. (Your arrows do this under the hood.)
- Enter at the close that finishes outside the MB range, in the desired direction.
- Skip if the breakout closes straight into a nearby opposing level (e.g., long closes right under PDH).
5) Stop, risk, and management
- Stop-loss (SL): Common choices:
- Conservative: the opposite side of the mother bar.
- Tighter: the correction low/high or 1.0×ATR beyond the breakout bar’s other side.
- Position sizing: Size by pips or ATR so each trade risks a constant % of equity.
- Management:
- Take partial at 1R, then trail behind swing lows/highs or via ATR.
- Invalidate if price accepts back inside the mother-bar range and holds.
6) Advanced: multi-inside bars & fakeouts
- IB chains: Several inside bars in a row = deeper compression. Expect a sharper move—still trade the MB break, not the IB’s.
- Fakeout (failed break): If price pokes above the MB and closes back inside, then breaks the other side, that’s a strong reversal pattern (your HUD can award extra credit if a false-break occurred at PDH/PDL/PWH/PWL).
7) Settings that help
- Arrows indicator: start with
MinScore = 2or3. - HUD: keep
NearLevel_ATRaround0.25(within 0.25×ATR is considered “near”). - Timeframes: Map on H4/D1, trade on H1 (M15 if you want more frequency).
8) Common mistakes to avoid
- Front-running: entering before the candle closes beyond the MB.
- Trading into a wall: taking a breakout that closes right into PDH/PDL/PWH/PWL.
- No context: taking IBs against the last impulse without a strong level/failure story.
9) 10-minute drill
- On H1, scroll back ~200 bars and mark every IB you see with a rectangle around the MB.
- Note which ones closed beyond the MB (valid) vs. just poked (invalid).
- Compare valid IBs that occurred with the last impulse vs. against it.
- Check how many valid IBs happened near PDH/PDL/PWH/PWL or after a false-break. You’ll notice higher quality there.
10) Quick checklist (printable)
- IB present → identify the mother bar.
- Last impulse direction aligns with planned trade.
- Not breaking straight into a nearby opposing level.
- Breakout candle closes beyond MB boundary.
- SL beyond MB opposite side (or structure/ATR); size set.
How your tools help
- PA Context HUD: shows Last Impulse, Trend, HTF, Near-Level, False-Break, Session and yields the up/down score.
- CapreContext_Arrows_v2: only plots an IB arrow when the candle close breaks the MB and the HUD score ≥
MinScore. Hover the dot to see the “why”.
Next up: Lesson 4 — Engulfing/Outside Bars: Momentum with Context. Want me to format Lesson 4 for WordPress now?
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