Constructing pin-bar and inside-bar setups

Unfinished construction on a naked chart

Candlestick charts can be read using only open-high-low-close bars, without overlay indicators. That is a naked-chart reading: the bar itself, not an added study, is the object under construction.

Pin-bar and inside-bar constructions are treated as complete when they form at support, resistance, or other overlapping levels. That overlap is confluence, the meeting of the candlestick pattern with support-resistance or other matching levels on the same chart.

Pin-bar location, trigger, and stop

A pin bar belongs to the same structural family as a hammer, dragonfly doji, shooting star, gravestone doji, or inverted hammer. It is recognized when its wick stands well beyond neighboring bars. In that reading a pin bar is a candlestick with a small body and a wick that stands well beyond neighboring bars, taken as rejection of the extreme that wick reached.

A long lower wick is treated as rejection of lower prices at support. A long upper wick is treated as rejection of higher prices at resistance. A longer wick is treated as a stronger rejection. That reading is wick-rejection: a long upper or lower shadow shows failed acceptance of that price extreme.

The described bullish pin-bar entry is a later close above the short wick. The stop-loss is placed below the long wick, with extra room beyond the exact extreme. The bearish case is reversed: a later close below the short wick, and the stop-loss above the long wick with the same extra room.

Three pin-bar exits are specified. One is a target three times the pin-bar height. Another is an exit on a later reversal candle during a trend. The third is an exit at the next support or resistance.

Pin-bar constructions are described as usable on all timeframes. The one-hour, four-hour, and daily charts are named, and the daily chart is preferred.

Inside-bar containment and break

An inside bar is a structure of at least two candles in which a later bar's entire high-to-low range sits inside the prior bar's range. Highs and lows are used. The real body is ignored, unlike harami or engulfing definitions.

An inside bar is described both as a continuation reading after expansion bars and as a possible turning-point reading at support or resistance. The later bar is required to be the opposite color of the preceding bar.

An inside-bar entry is a break of the contained bar's high or low. The stop-loss is beyond the opposite extreme of that inside bar. The stated target is twice the initial risk distance.

What the stop-loss is doing

In both constructions the stop-loss is an order placed beyond the pattern's invalidating extreme so a failed bar reading has a predefined exit. Editorial: without that bound, and without confluence at support-resistance, the wick or contained range remains a description of the chart rather than a complete setup.