Reading candles
Inside bar false breakout
Price breaks out of an inside bar, then closes back inside the mother bar's range.
Widely taught. The Exchange can test it on public price history and will say what it finds.
No published test found. The stop-cluster mechanism has support (see false-breakouts-and-stop-runs).
What it is
A close back inside the range after a break says the break found no follow-through. The two versions are a break above that fails and a break below that fails.
What it suggests
Orders placed beyond the range were triggered and the move stopped. Whether that reflects deliberate stop hunting or ordinary order flow is not something a chart can show.
How to check it
Wait for the candle to close back inside the range and place the stop beyond the failed extreme.
Common mistakes
- Assuming a failed break must reverse.
- Trading it away from a level.
How we will test it
On public price history, never on anyone's account. Until it is done, the note above is all we can honestly say.
- Cases: a break of an inside bar that closes back inside the mother range
- Measure: share of cases where price then reaches the opposite side of the mother bar before the failed extreme
- Window: next 10 bars
- Compared with: plain inside-bar breaks that held
Related lessons
Written in our own words. Education only, not financial advice.