Nifty and Sensex Yearly Chart

Seniors.. pls share some insights on the inside bar formation and its future implications..

An inside bar is a bar which is completely within the range of the preceding bar, i.e. it has a higher low and lower high than the bar immediately before it. An inside bar indicates a time of indecision or consolidation. Inside bars often occur at tops and bottoms, in continuation flags, and at key decision points like major support/resistance levels and consolidation breakouts.

The above is a basic definition of an inside bar readily available on the internet. Now coming back to its use. See, inside bar suggests a period of range contraction. This is a concept which I think is spoken about by two very good traders (Tobey Crable and Linda Bradford Raschke). Now when you see an inside bar like the one you have shown above, one can go long if the current bar (2010 bar) being formed takes out the previous high (i.e. high of the inside bar ,2009). Also one can go short when the current bar (2010 bar) takes out the low of previous bar (i.e. low of inside bar,2009). However, please keep this point in your mind that at times these signals are not that useful if you use them on a standalone basis. You need to include them with a system or have a set of rules to trade.

For information on how to use it to trade effectively, go to the Advanced Trading Strategies thread and find the Trading Nr7 thread.

Tc.

For interesting discussions go through this thread.

http://www.traderji.com/technical-analysis/25769-your-honest-opinion-please-6.html

Thanks Raunak and Prasadam Sir.. the information is really useful

Had to delete Sensex Yearly chart because of quota limits.. charts saved in
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