Inside Bar Breakout Failure
Apr 1, 2016
The Inside Bar Breakout Failure indicator identifies specific price action patterns where an initial breakout of an inside bar fails and reverses, providing potential signals for trend exhaustion or trap scenarios.
Usage
The indicator can be used to spot "fakeouts" or traps occurring after an inside bar period. Traders often look at inside bars as periods of consolidation; when price breaks the high or low of that inside bar but fails to sustain the move and closes back within the range, it suggests a lack of momentum in the direction of the breakout.
- Bullish Breakout Failure: Occurs when price drops below the low of an inside bar but closes back above it. This is highlighted with a green bar color and a label below the bar.
- Bearish Breakout Failure: Occurs when price rises above the high of an inside bar but closes back below it. This is highlighted with a red bar color and a label above the bar.
These signals are often used by mean-reversion traders or those looking for liquidity grabs at key short-term levels.
Details
An inside bar is defined as a candle where the high is lower than or equal to the previous candle's high, and the low is higher than or equal to the previous candle's low.
The breakout failure logic triggers when:
- The preceding bar was an inside bar.
- The current bar's wick extends beyond the inside bar's range (breakout).
- The current bar's close returns inside the inside bar's range (failure).
Settings
- Show label: Toggles the visibility of the "Inside Bar Breakout Failure" text labels on the chart.
FAQ
How do I access Inside Bar Breakout Failure?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
What timeframes does this work best on?
While the pattern is fractal and appears on all timeframes, many price action traders prefer using it on higher timeframes (1H, 4H, Daily) to filter out market noise.
Can I set alerts for these signals?
Yes, the script includes alert conditions for both bullish and bearish breakout failures, which can be configured via the TradingView Alert menu.
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