Price action setups in forex trading

The inside candlestick

An inside candlestick is a good indicator that a bullish or a bearish price trend will keep on going in the same direction. An inside candlestick has a lower high than the previous candlestick and a higher low than the previous one. This inside candlestick suggests that prices are still ranging for a bit (as opposed to trending) before a breakout occurs in the direction of the main trend. This signal will be stronger on an H4 or a daily chart. In the below illustration, you can see the formation of an inside candlestick after a perfect pin bar signal which precedes a change in the trend. In addition, this inside bar provides a strong indication that the trend will continue as it manifests itself at the same time as a 62% retracement.

Inside bar

Daily USD/CHF chart


Pin bars / dojis

Pin bars typically have a very high accuracy rate in trending markets, especially when they occur at significant confluence levels such as support and resistance levels. Pins may be taken against the trend if they are well defined and if they significantly exceed surrounding price bars.

In the below example, you can see some pins appearing within a rising market. Every time price bounces off the bullish trendline, prices go beyond the previous resistance level.

Pin bar setup
Daily EUR/USD chart


The false break of a support or resistance level

A false break configuration indicates a significant failure and therefore a probable reversal of the trend (and this is true within the forex market as well as any other market you're observing). This configuration features a false break of an inside candlestick pattern or a significant price level. It will often consist of a bullish or bearish stem completely dominating the range of the doji (pin), thereby leading to a false break.

Daily GBP/USD chart

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