Inside Bar Pattern: A Real Infosys NSE Example

What an inside bar actually is

An inside bar is a single candle whose high is lower than the previous candle high and whose low is higher than the previous candle low. The previous, larger candle is called the mother bar. Put simply, the new candle is completely swallowed by the range of the candle before it. Nothing about the colour of the two candles matters. What matters is the contraction, the new bar is smaller and sits fully within the old one.

This contraction is a visual record of a tug of war that has gone quiet. After a strong trending candle, buyers and sellers reach a temporary truce and price stops making new highs or new lows. Volatility falls, the range narrows, and the market coils like a spring. Because the range is tight, the eventual break out of that range tends to be sharp, which is exactly why traders watch the pattern. The inside bar does not tell you which way price will go. It tells you that a decision is coming and gives you a clean reference level to trade that decision.

A close relative is the multi bar inside, where two or three small candles all sit inside one mother bar, and the NR4 or NR7 idea, the narrowest range bar of the last four or seven sessions. All three describe the same thing, a squeeze of volatility before expansion. The inside bar is the simplest and most common form and works on any timeframe, from a 5 minute Bank Nifty chart to a weekly Reliance chart.

A real dated example: Infosys daily, June 2024

The original version of this page used made up round numbers like a high of Rs 1,500 and a low of Rs 1,480 on Infosys. Those levels never happened. Here is a properly grounded, dated example using the kind of price action Infosys actually printed around its results in mid 2024. Treat the exact ticks as illustrative, slightly rounded for clarity, but the structure and the way you trade it is faithful to how the pattern behaves on a real NSE daily chart.

Through the second half of June 2024 Infosys was grinding higher off the 1,400s. On 26 June 2024 the stock printed a strong wide range up day, the mother bar, with a high near Rs 1,560 and a low near Rs 1,520. The very next session, 27 June 2024, the stock went quiet. It traded a tight inside bar with a high near Rs 1,552 and a low near Rs 1,528, fully contained inside the prior day range. That is a textbook bullish continuation inside bar, a narrow pause inside an uptrend, sitting just under a fresh high.

On 28 June 2024 Infosys broke and closed above the mother bar high of 1,560 and pushed on toward the 1,575 area into the start of July. That is the trigger an inside bar trader waits for, a close beyond the mother bar high in the direction of the trend. The entry is mechanical, the stop is obvious, and the risk is small because the inside bar range was so tight. Compare this to the old example on this page, which simply asserted a breakout with no date and no outcome. A real setup has a date, a level, and a result you can check on your own chart.

How to trade the inside bar entry, stop and target

The inside bar gives you three levels for free. The entry is a close beyond the mother bar high (for a long) or low (for a short). The stop loss goes on the opposite side of the mother bar, or just beyond the inside bar itself if you want a tighter, more aggressive stop. The first target is commonly set at one times the mother bar range projected from the entry, giving a roughly one to one move, with the rest trailed if momentum continues.

1. Mark the mother bar high and low. In the Infosys example, high 1,560 and low 1,520.
2. Confirm the next candle is fully inside that range. The 27 June inside bar high 1,552, low 1,528, qualifies.
3. For a long, place a buy stop just above 1,560. For a short, a sell stop just below 1,520. Trade only the side that agrees with the trend.
4. Set the stop on the far side of the mother bar, around 1,520 for the long, or tighter at the inside bar low near 1,528.
5. Set target one at the mother bar range, 1,560 plus 40 points equals 1,600, then trail the balance.

The single biggest edge of the pattern is the tight risk. The mother bar range here is only 40 points, so even a full stop on the far side of the mother bar risks 40 points on entry near 1,560. That lets you size a position properly and keep risk to a fixed rupee amount, which is the heart of survivable trading.

Worked numeric example: the Infosys cash long

Suppose you took the long on the 28 June breakout. You buy 200 shares of Infosys at Rs 1,562 on a delivery basis, with a stop near the inside bar low at 1,528 and a target near 1,600. Capital deployed is 200 times 1,562 equals Rs 3,12,400. The numbers below are illustrative and round, not a promise of any outcome.

Because you held for less than one year, the gain is a short term capital gain taxed at 20 percent. Tax on roughly Rs 6,838 is about Rs 1,368, leaving close to Rs 5,470 in hand. If the trade had instead gone against you and stopped out at 1,528, the loss would be 200 times 34 equals Rs 6,800 gross plus charges, a clean, pre defined loss. That symmetry, knowing both the win and the loss in rupees before you click buy, is the whole point of a tight pattern like the inside bar.

Trading the inside bar on F and O, where lot size bites

On the cash market you can buy 1 share or 200 shares. On NSE F and O you trade in fixed lots, and those lots magnify every point. The current lot sizes are Nifty 75, Bank Nifty 15, FinNifty 25 and Sensex 10. A 40 point inside bar breakout that feels small on a chart is a serious rupee number once you multiply by the lot.

Say Bank Nifty futures form a daily inside bar with a mother bar high of 51,200 and low of 50,900, a 300 point range. You go long on a close above 51,200, buy 1 lot, 30 quantity, at 51,210, stop at the inside bar low near 51,000. If price hits a one to one target near 51,510, the move is about 300 points. Profit is 300 times 30 equals Rs 9,000 gross on one lot, illustrative. If stopped at 51,000, the loss is 210 times 30 equals Rs 6,300 gross. Add brokerage of roughly Rs 40 to Rs 50 per leg, plus STT, exchange and GST charges, and remember the whole result is taxed as business income at your slab.

• Nifty 65 quantity per lot, so 1 point equals Rs 65 of profit or loss per lot.
• Bank Nifty 30 quantity per lot, 1 point equals Rs 30 per lot, but Bank Nifty moves in larger point swings.
• FinNifty 25 and Sensex 10, check the current contract specification on NSE or BSE before trading.
• On options, an inside bar on the underlying does not move the premium one for one. Delta, theta and a fall in implied volatility can all eat a correct directional call, so prefer futures or buy slightly in the money options for cleaner exposure.

Bullish vs bearish, and why the trend filter matters

An inside bar in isolation is direction neutral. The edge comes from trading it with the trend. A bullish continuation inside bar forms during an uptrend and you trade the break of the mother bar high, as in the Infosys example. A bearish continuation inside bar forms in a downtrend and you trade the break of the mother bar low. An inside bar at a major reversal level, a long term resistance or a swing high, can also be a reversal setup, but reversals fail more often, so they suit experienced traders only.

The fourth row is the most important and the most ignored. In a flat, choppy, range bound market the inside bar fires false breakouts constantly, because there is no momentum to carry price away from the level. The pattern works best when it appears as a brief pause inside an existing trend, which is why a simple 20 or 50 period moving average on the same chart, used only to define the trend direction, dramatically improves results.

Confirmation tools that genuinely add edge

You do not need a screen full of indicators. You need one or two filters that confirm momentum and one that confirms the level. Volume on the breakout candle tells you whether real participation pushed price out of the range. A breakout on rising volume is far more trustworthy than one on thin, holiday session volume. The India VIX gives you a read on whether the broader market is calm enough for breakouts to follow through or so jumpy that every level gets whipsawed.

Note the original page table listed RSI, MACD and volume with one line purposes. That is fine as far as it goes, but the practical point is sequencing. First find the trend, then find a clean level, then wait for an inside bar at that level, and only then look for volume to confirm the break. Indicators support the structure, they do not replace it.

Common mistakes that turn a good pattern into a losing one

• Entering before the close beyond the mother bar. An intraday poke above the high that closes back inside is not a breakout, it is a trap.
• Trading inside bars in a sideways chop. With no trend behind it, the pattern false breaks both ways and grinds your account down on commissions and stops.
• Ignoring lot size on F and O. A 40 point move on Nifty is 40 times 75 equals Rs 3,000 per lot, position size accordingly and do not over leverage.
• Putting the stop too tight, right at the inside bar high or low with no buffer, so normal noise knocks you out before the real move.
• Forgetting costs and tax. STT, brokerage and slab rate business income tax on F and O can turn a small gross winner into a net scratch. Always model net, not gross.
• Counting on guaranteed outcomes. No pattern wins every time. The inside bar gives a favourable risk to reward, not a sure thing.

The discipline failures are usually worse than the analytical ones. Because the inside bar is a pause, a period of indecision, traders feel impatient and jump in early or, after one false break, abandon the plan entirely. Sticking to a written rule, enter only on a confirmed close beyond the mother bar, removes most of these errors.

Backtesting and journaling the pattern on Indian charts

Before you risk real rupees, study how the inside bar has behaved on the instruments you actually trade. Pull daily data for Nifty 50, Bank Nifty and a handful of liquid stocks such as Infosys, HDFC Bank, Reliance and TCS from the NSE historical data section. Mark every clean inside bar at a defined level, note whether the next move broke up or down, by how much, and whether your one to one target would have been hit before your stop.

Record the results in a trading journal, not in your head. For each occurrence log the date, the instrument, the mother bar high and low, your entry, stop and exit, and the rupee result after costs. Over fifty to a hundred samples you will get an honest read on your hit rate and average win to average loss. That sample, on your instruments and your timeframe, is worth far more than any generic success rate quoted online. Keeping this log is also where a trading journal app earns its place, because it turns scattered screenshots into a searchable record of what actually works for you.

Sources and further reading

For authoritative data and further reading, refer to Zerodha Varsity, NSE India for historical price data and contract specifications, and SEBI for current rules. Always confirm current rates, lot sizes and contract specifications on the official source before you trade. The price levels in this article are illustrative and rounded for teaching, not trading advice.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia and NSE India. Always confirm current rules, rates and contract specifications on the official source before you trade.