Is the Inside Bar Breakout Profitable? 192 Backtests

An inside bar sits entirely within the previous bar's high and low. It is read as a pause, and the usual rule is to take the direction in which the following bar clears the bar before the pause. An outside bar is the inverse: one that clears both the previous high and the previous low.

The comparison this needs is obvious once stated. The same level, cleared by the same bar, with the bar before it not contained. If the containment carries information, the two have to differ.

On the hourly chart in 2025, 6,126 bars cleared a two-bar-old high or low. 566 of them, 9.24%, followed a contained bar.

Ten bars later, the break's direction had held for 49.47% of the contained breaks and 50.59% of the rest. In 2024 it reads 47.68% against 51.19%, the same way round.

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What the inside bar and outside bar actually test

Formiq's backtester reads three bars:

• The mother (two back): the bar whose high and low set the level
• The contained bar (one back): its high at or below the mother's high, its low at or above the mother's low
• The breaking bar (now): clearing the mother's high goes long, clearing its low goes short

Highs and lows, wicks included. Bodies play no part.

The outside bar is counted separately here: a bar that clears both the previous bar's high and its low, taken in the direction of its own close.

Only a tenth of breaks come after an inside bar

Counting every bar that cleared a two-bar-old high or low, and splitting out the ones preceded by a contained bar:

Contained breaks are 9.24 to 12.54% of the total. The other nine in ten clear the same level with the previous bar sticking out of the mother.

Settings and how to add a threshold

Nothing is drawn: the pattern is a position relationship between bars already on the chart.

Neither has a numeric field. There is no setting for how tightly the bar has to be contained; it either is or it is not. Filters go beside the condition instead.

The published trading rule

Enter at the close of the breaking bar in the direction of the break. The usual exit is a break of the other side, which is what the condition does here too. The usual stop sits at the far end of the mother bar.

How this was measured

Against the same break, uncontained

Two cells of six came out ahead, on different charts in different years. The 15-minute chart is +1.11 then -1.54; the 4-hour chart is -1.43 then +2.29. The hourly chart is negative in both years.

In pips the hourly contained break returned +0.58 and +1.29 against +1.89 and +2.14 for the uncontained one. Both are positive; the contained one is smaller.

What if you fade the break instead?

Selling the up-break and buying the down-break, on exactly the same signals:

Taking the break and fading it are the same trades reversed, so the two columns sum to 100% apart from ties. The fade is ahead of the break in four cells of six.

Against an ordinary break of the same level the fade is also ahead in four cells, by 0.21 points (4-hour 2024) to 2.16 points (4-hour 2025), and behind in the 15-minute and hourly cells of 2025. The four it wins are not the same four in which it beats the break.

So "the inside bar break is a trap, fade it" comes out marginally better than taking the break over these two years, and stays within roughly two points of an ordinary breakout either way.

Two in a row, three in a row, and both ends at once

Splitting by how many bars in a row were contained before the break:

The three-or-more column holds between 1 and 21 signals. The hourly 85.71% is six wins out of seven, which decides nothing. Two in a row read lower than one in five cells of six. The longest run of contained bars in the data is five, on the hourly chart in 2024.

A breaking bar can also clear the mother's high and its low on the same bar.

Such a bar satisfies the long condition and the short condition at once. A single candle does not record which end was reached first, so the order cannot be recovered. Formiq's backtester checks the long side first, which means every two-ended break is taken as a buy. On the 4-hour chart in 2025 that is 31.79% of contained breaks.

Read as buys, those bars returned between 48.85% and 64.71% on 17 to 146 signals. The direction is a resolution rule rather than a measurement, so treat that column as behaviour to know about rather than as a result.

What the outside bar does differently

Holding the outside bar for ten bars in the direction of its close:

Ahead in four cells of six, by between -0.81 and +2.19 points. Like the inside bar, it does not separate from an ordinary break by a margin that holds.

Is a harami the same thing?

Both describe a small bar swallowed by a large one, but they complete on different bars. The harami completes on the contained bar itself; the inside bar breakout completes on the bar after it. They also test different things: bodies with a colour flip against highs and lows.

They coincide on 0.91 to 2.80% of harami signals. Similar names, different moments.

Trading all 192 runs

Entering at the close of the breaking bar and exiting on a break of the other side, hourly:

Two of the eight cleared both years on the hourly chart: the plain breakout and the ATR-filtered one, the latter on 33 and 54 trades.

The 15-minute chart cleared one (the 50-MA direction) and the 4-hour cleared three (the ten-bar exit, the harami, and the harami with the 50-MA direction). Not one condition cleared both years on even two of the three charts.

Splitting 2025 in half

The plain breakout finishes 2025 at +384.9 pips with -484.4 of that in the second half. Three of the five were profitable in both halves.

Last year's winner, held through this year

The 15-minute and 4-hour picks landed below the following year's median. The 4-hour breakout went from +2,999.9 pips to -779.6.

Stops, targets and cost

Hourly inside bar breakout. The 60 / 30 exit produces the highest win rate and loses money in both years. The entries are identical and the win rate runs from 34.31% to 54.88%.

Spread paid matched trade count times 0.3 pips. The 15-minute harami still returns -485.8 pips at zero spread, so its loss comes from the entry rather than the trade count.

Related articles

• Candlestick pattern win rates: both of these among 17, over the same two years and the same kind of control
• Is the engulfing candle profitable?: the harami's mirror image, measured against colour flips that did not engulf
• Morning star and evening star: a three-bar reversal taken apart clause by clause
• Do fair value gaps really fill?: another price-action claim measured against ordinary bars

Notes

The data is USD/JPY from 1 January 2024 to 31 December 2025. Fills are at the close, the spread is fixed at 0.3 pips, and the lot is 0.1. Detection uses the same code path as the backtest and reads bars from before the test window. Because the horizons run out to 20 bars, that many bars at the end of each year are excluded. A bar clearing both ends of the mother is counted on both sides in the break-and-fade table and taken as a buy in the backtests. The harami overlap counts bars where both conditions fired in the same direction.